The intent of this document is to define what bonds are as a vehicle for investors, including a detailed explanation of the basic terms associated with bonds, the different types of bonds available on the markets, bond ratings and why investors may want to consider bond investing to have a more diversified portfolio. Finally, the paper will discuss the relationship between bonds and interest rates in determining bond valuations. After the discussion there will be a short summary of the main points explained in the document. Everyone in the investing world is constantly looking for ways to insulate themselves from the volatility surrounding the markets in terms of investment strategy and diversification. Most investors view the common stock options and mutual fund markets with hesitation in the face of the global volatility facing today's financial markets. Another investment market option to consider, although not immune to external volatility, is the bond market. Ross stated that the bond market has a broader scope than the stock market (2011). A bond is an investment option in which the investor lends money to large organizations such as corporations, state and local municipalities, the U.S. government, and governments abroad (Parker, 2014). The Securities and Exchange Commission (SEC) classifies a bond as a debt instrument. The bond, also known as a debt security, is issued to the public (creditor) who holds the bond until it is repaid by the borrower in interest-only payments over a specified period (Ross, Westerfield, & Jordan, 2011). At the end of the bond term and only then the loan principal is paid in full as a lump sum payment. It is similar to a promissory note held by the creditor until the borrower fulfills his or her obligations...in paper form......editor for a company if legal protections are in place that give the bond investor the first right to payment before payment is received among the shareholders of the same company.ReferencesUnlimited. 2014. 26 January 2014. .Words from investors. nd Web Finance, Inc. January 26, 2014. .Moody's. 2014. Moody's Investors Service, Inc., Moody's Analytics, Inc. January 26, 2014. Parker, Mike. 2014. Document. January 26, 2014. .Ross, Stephen A, Randolph W Westerfield, and Bradford D Jordan. Business finance essentials. 7th. New York: McGraw-Hill/Irwin, 2011. Book.