Bond ETFs

A bond is basically an IOU. When a government or a company needs to borrow money, it can sell bonds to investors. In return, it promises to pay regular interest (called the "coupon") and to give the original amount back on an agreed date. A bond ETF is a single fund that holds hundreds or thousands of these IOUs at once, so you're spreading your money across many borrowers instead of just one.

There are two main flavours. Government bonds are loans to a country (like Germany or the United States) and are usually the steadier kind. Corporate bonds are loans to companies, which tend to pay a bit more interest to make up for the slightly higher chance the company runs into trouble.

Beginners often use bonds as the calmer part of a portfolio: the income is more predictable and the day-to-day price swings are usually smaller than with stocks. But "steadier" is not "risk-free". Bond prices can fall, especially when interest rates rise, so it helps to understand what you're holding.