2007-02-06 06:24:59 · 12 answers · asked by **LIBERTY** 1 in Business & Finance ➔ Investing
There are several types of bonds, but they are graded by investment firms. They aren't graded by rate of return called "yield," but by the risk. The greater the chance of the company or even government of paying you back decreases their ranking (anything worse than A is nicknamed junk). To compensate, these companies will often pay a higher yield.
Right now bonds are a horrible investment in the U.S., with the junk bonds being both risky yet the only ones beating inflation and taxes right now. You should be looking at foriegn governement bonds, some of which offer a better return than you can get in the U.S.
2007-02-06 18:15:03 · answer #1 · answered by gregory_dittman 7 · 0⤊ 0⤋
When investing in bonds it's the credit and inflation risks that count most. You may invest into high yeld bonds which are very risky and never get your money back if the entity goes bankrupt. You may also invest in bonds where the credit rating is not a problem, but the interest rate is so low that if you have high inflation for a period of time it will eat up your income from the bonds.
There are other risks that are not as significant, such as early recall, etc.
2007-02-06 06:37:18 · answer #2 · answered by Kalistrat 4 · 0⤊ 0⤋
when an investor invests in anything not cover by some govt back plan there is a risk involved. now how much of a risk should one take is strictly up to the individual. each of us has a different stress level when it comes to investing. age also will come in to play when you are discussing risk in terms of investing. my self i have about 35% (at one time this was higher) of my money in corp bonds which pay a very good divident. but as i get older i am slowing converting this money in to something less rickly like CD's. i realize this did not help you answer the question but the links provided by the others should given you a general ideal of the bond market. good luck.
2016-05-24 00:12:27 · answer #3 · answered by Anonymous · 0⤊ 0⤋
There is very little risk involved with Bonds. If you buy government backed Bonds, then you are pretty safe. I would invest in bonds if you are a conservative investor and basically just have a lot of money and don't want to make a lot of profit on them. There are many types out there, however, you usually have to buy them in certain amounts, it would be wise to talk to a financial advisor and see where your risk assessment is. In my personal opinion Bonds are a way to put money away so that you aren't taxed on it, without investing in something like stocks and having the possibility of losing money.
2007-02-06 06:34:10 · answer #4 · answered by Anonymous · 1⤊ 0⤋
Default risk: the company delays its interest payment, or sometimes doesn't pay at all.
Downgrade risk: The bond gets a downgraded rating from S&P, Moodys and Fitch
Interest rates risk: Fed interest raise, making the bond less atractive and decreasing in market value.
You can eliminate the latter two if you hold a bond until maturity.
2007-02-06 11:16:48 · answer #5 · answered by Carlos G 3 · 0⤊ 0⤋
The main risks are interest rate risk and credit risk. The first one means that bonds will become more expensive when interest rates go down, and cheaper when interest rates go up. The longer the maturity the higher th effect of interest rate changes.
The second one is the risk of default by the bond issuer, either on the interest or on the principal, which means you can lose your money.
If you can't afford these risks, or are unwilling to take them, go for relatively short maturity of maximum 2-5 years, and only go for government bonds.
2007-02-06 06:30:44 · answer #6 · answered by Cheanea 3 · 0⤊ 0⤋
Bonds work best when Left for the Full Term of the Investment!
They rise and fall according to the Market,but if you allow the trader to spread your Investment and Report back to you(Every 6/12 Months) That gives you a Better chance of Making Profit!.
2007-02-06 06:30:06 · answer #7 · answered by J. Charles 6 · 0⤊ 0⤋
you dont really have much risk. you know what the maturity value or return percentage will be when you buy it. the risk is that is that the right thing to do with your money or could you make more with it during a time period you buy the bond for say 2-10-30 yrs
2007-02-06 06:28:32 · answer #8 · answered by therernonameleft 4 · 0⤊ 1⤋
not much at all. bonds have always been a low risk investment. i
2007-02-06 07:28:27 · answer #9 · answered by jimmy 1 · 0⤊ 0⤋
No reason to deal with this. Buying a fund solves it. Risk is interest rates rising if you are going out of few yrs or the seller defaulting.
2007-02-06 08:09:31 · answer #10 · answered by vegas_iwish 5 · 0⤊ 0⤋