Bond Investing Essentials
What are risks associated with investing in bonds as a long-term investment? Why would bonds/bond mutual fund be used within an investment portfolio and how might such an investment impact an investor?
Risks Associated with Investing in Bonds as a Long-Term Investment:
- Interest Rate Risk:
- Bonds are sensitive to changes in interest rates. When interest rates rise, bond prices typically fall, and vice versa. This can affect the market value of bonds held in a portfolio.
- Inflation Risk:
- Inflation erodes the purchasing power of fixed-income investments like bonds. If the rate of inflation exceeds the bond’s yield, the real (inflation-adjusted) return on investment may be negative.
- Credit Risk:
- Bonds issued by companies or governments with lower credit ratings (high-yield or junk bonds) carry a higher risk of default…
Risks Associated with Investing in Bonds as a Long-Term Investment:
- Interest Rate Risk:
- Bonds are sensitive to changes in interest rates. When interest rates rise, bond prices typically fall, and vice versa. This can affect the market value of bonds held in a portfolio.
- Inflation Risk:
- Inflation erodes the purchasing power of fixed-income investments like bonds. If the rate of inflation exceeds the bond’s yield, the real (inflation-adjusted) return on investment may be negative.
- Credit Risk:
- Bonds issued by companies or governments with lower credit ratings (high-yield or junk bonds) carry a higher risk of default…
Risks Associated with Investing in Bonds as a Long-Term Investment:
- Interest Rate Risk:
- Bonds are sensitive to changes in interest rates. When interest rates rise, bond prices typically fall, and vice versa. This can affect the market value of bonds held in a portfolio.
- Inflation Risk:
- Inflation erodes the purchasing power of fixed-income investments like bonds. If the rate of inflation exceeds the bond’s yield, the real (inflation-adjusted) return on investment may be negative. (Bond Investing Essentials)
- Credit Risk:
- Bonds issued by companies or governments with lower credit ratings (high-yield or junk bonds) carry a higher risk of default…
