What kind of investment typically generates regular income through interest payments?

Bonds are a type of investment that typically generate regular income through interest payments. When an investor purchases a bond, they are essentially lending money to an issuer, which may be a corporation or government entity, in exchange for periodic interest payments, known as coupon payments. These payments are typically made semiannually and will continue until the bond matures, at which point the principal amount is returned to the investor.

This regular income feature distinguishes bonds from other types of investments. For example, equity stocks may pay dividends, but they do not provide guaranteed regular income, as dividends depend on the company's performance and decisions. Real estate can generate income through rent, but that income can be less predictable and typically involves more active management. Mutual funds might provide income if they invest in bonds or dividend-paying stocks, but they do not inherently guarantee regular income on their own.

Overall, bonds are specifically designed to provide consistent interest payments, making them a reliable choice for investors seeking regular income.