Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Bondholder

What it is:

A bondholder is a person who owns a bond issued by a borrower, typically a company or a government.

How it works (Example):

A bond represents a loan agreement between an issuer and an investor, and the terms of the bond obligate the issuer to repay the borrowed amount (the principal) by a specific date. The investor (the bondholder) usually earns a specific amount of interest on a semiannual basis.

Bondholders can buy and sell their bonds on the bond market.

Why it Matters:

Being a bondholder is much different that being a shareholder. For one thing, bondholders are lenders; shareholders are owners. Also, bondholders cannot vote and they are not entitled to dividends. But perhaps most important is the fact that bondholders rank senior to shareholders. This means that the bondholders are among the first in line to be repaid in the event the issuer liquidates. Shareholders might receive some proceeds from the liquidation after this point, if there is anything left. This seniority provides an extra level of security for bondholders, and this is one reason corporate bonds are generally considered "safer" investments than stock.

Related Terms View All
  • Broken Date
    For example, let’s assume that a futures contract for shares of Company XYZ is three...
  • Qualified Adoption Expenses (QAE)
    For example, let's assume that Jane would like to adopt a child. The adoption agency has...
  • Price-Based Option
    A price-based option gives the holder the right, but not the obligation, to purchase or...
  • Paris Club
    The Paris Club has several members, including the United States, United Kingdom, Japan,...
  • Elephants
    CalPERS (the California Public Employees' Retirement System) is the nation's largest...