What are the risks associated with investing in bonds?
Usually bonds offer low or moderate risk. However, some of the risks associated with investing in bonds come from credit risk, interest rate risk, inflation risk, liquidity risk.
Credit risk refers to the risk of default by the issuer.
Interest rate risk refers to the risk of changes in interest rates affecting the bond’s price and yield.
Inflation risk refers to the risk of inflation eroding the bond’s purchasing power.
Liquidity risk refers to the risk of not being able to sell the bond at a fair price when needed.