maturity
The date on which a financial instrument's principal becomes due for payment.
Example
“The 10-year bond would reach maturity in 2030, at which point he would receive his principal back.”
Memory Tip
When fruit is MATURE, it's ready to pick. When a bond matures, it's ready to be collected.
Why It Matters
Understanding maturity helps you plan when your money will be available and what returns you can expect by a specific date. This is crucial for aligning your investments with major life expenses, retirement timing, or other financial goals that require funds at particular moments.
Common Misconception
Many people think maturity means their investment stops growing or earning returns on that date. In reality, maturity simply marks when you can access your principal amount, and you may choose to reinvest it or let it continue earning interest depending on the financial product.
In Practice
If you purchase a five-year bond for 10,000 dollars at 4 percent annual interest, the maturity date is five years from purchase. On that maturity date, you receive your original 10,000 dollars back plus the accumulated interest, and you must then decide whether to reinvest the money or use it for another purpose.
Etymology
From Latin 'maturitas' meaning 'ripeness' — when an investment has fully 'ripened' and is ready to be collected.
Common Misspellings
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