example of risks when buying bonds?

Hi there,

Some risks include:

1) Credit Risk

2) Reinvestment Risk

3) FX Risk

4) Interest Rate Risk

5) Call Risk

6) Liquidity Risk

I think we should also revise what we view as “safe”.

Bonds are only as safe as the company that issues them. If the company close shop with no money then there’s no amount of bonds to save it.

Bonds are safer compared to common stock of the company. Because of it’s hierarchy in claims, basically bond are the first scavenger to pick the flesh off the bones.

Also, in financial crisises, when equities are giving extremely low or negative returns, bonds don’t care, coupons still have to be paid(again, if the company is healthy enough to pay). So during crisis, they are seen to be yielding more than equities. This doesn’t make them safer though, it’s just the mechanism of the bond. But this is typically in times of crisis.