Principal

Principal, in finance and investing, refers to the initial amount of money that is invested, borrowed, or lent before any interest, return, or earnings are added. For investments, the principal is the base sum you use to purchase stocks, bonds, or other assets—the foundation on which returns are calculated. In loans or debt, principal is the original amount borrowed, which is repaid along with interest over time. For bonds, principal is the face or par value repaid to the investor at maturity, not including interest payments. The concept of principal underpins all calculations for growth, yield, and interest in financial transactions.