Bonds
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What are the major risks of bond investments?
Like all investments, bonds have a number of potential risks. The most common ones that could affect you are:
- Credit Risk
The risk that the issuer of the bond will default and not make the interest payments they promised, or
not repay the principal at maturity.
- Interest Rate Risk
The risk that marketplace interest rates will rise, which will lower the price of the bond. This will
result in a loss if you need to sell the bond before its maturity date.
- Inflation Risk
The risk that rising inflation will lower the value of the interest payments you earn from a bond.