The Risks of Investing in Bonds
The Risks of Bond Investing: Understanding Dangers in Fixed-Income Investing
Bonds are among the safest investments in the world. But no investment is entirely risk free. In fact, fixed-income investing has its own particular forms of risk: inflation, reinvestment, default, downgrade, and liquidity risk to name a few.
The Relationship Between Risk and Yield in the Bond Market
A bond's yield is often an indicator of its risk - the higher the yield, the higher the risk; the lower the yield, the lower the risk. Find out why this is, and why investors should never pick a bond or bond fund solely on the basis of its yield.
Credit Risk vs. Interest Rate Risk
Bonds are often classified as “low risk” or “high risk,” but this is only half of the story. There are actually two kinds of risk: interest rate risk and credit risk. These are two distinct types of risk that can have a very different impact on various asset classes within the bond market. Find out interest rate risk and credit risk will affect...
What is Reinvestment Risk?
Reinvestment risk, a challenge all investors face when bond yields are falling, is the risk that future cash flows will need to be reinvested in lower-yielding securities. Learn more about what reinvestment risk is, and how you can avoid it.
Bond Default: Definition and Explanation
Find out what a bond default is, what occurs when a bond defaults, how frequently this occurs, and how a default can affect the performance of individual bonds and bond funds.
The Risks of High Yield Bonds
What are the risks of high yield bonds? Learn more about the risks of high yield bonds, and the difference between the risk of individual high yield bonds compared to high yield bond funds and ETFs.
The Risks of Money Market Funds
Most investors view money market funds as being a “risk-free” investment on par with a bank account or certificate of deposit. In fact, money market funds have more risk than you may think – a key consideration for anyone who has their short-term cash or emergency fund invested in money funds.
How Safe are U.S. Treasuries?
U.S. Treasuries are generally considered one of the safest – if not the safest – investments in the global financial markets. While this is true, it depends how you invest. If you own Treasuries via mutual funds or ETFs, or if you sell them before they mature, they can in fact be quite risky. Find out more about the potential risks of U.S....
The Risks of Municipal Bonds
What are the risks of municipal bonds? Learn more about the risks of municipal bonds, and the difference between the risk of individual municipal bonds compared to municipal bond funds and ETFs.
Inflation Risk Explained
Inflation can hurt bonds in two ways, by 1) causing the Federal Reserve to raise interest rates and 2) by lowering your real return (or in other words, your return after inflation). Find out more about how inflation can impact bond returns.
The Risks of Corporate Bonds
Learn more about the risks of corporate bonds, and the difference between the risk of individual corporate bonds versus corporate bond funds and ETFs.