What type of returns do bonds generally provide?

Bonds generally provide fixed income returns through interest payments, which is a critical characteristic of these financial instruments. When an investor purchases a bond, they are essentially lending money to the issuer in exchange for periodic interest payments, known as coupon payments, and the return of the principal amount when the bond matures. This structured return model allows investors to predict their income from bonds over time, making them a reliable source of steady income.

This fixed-income aspect of bonds contrasts with other investment types, such as stocks, which can offer variable returns that depend on the company's performance and market conditions. Stocks may pay dividends, but that is not the primary focus of bonds. Furthermore, while some bonds may prioritize capital preservation, they generally still offer interest payments that count as returns, making the assertion that they provide no returns incorrect. Consequently, the stability and predictability of the income provided by bonds distinctly qualifies them as a source of fixed income returns through interest payments.