What to Consider When Investing In Bonds
When investing in bonds, it's crucial to consider credit ratings, which indicate the issuer's ability to repay debt; interest rates, since they affect bond prices and yield; and maturity dates, which determine when you'll receive the principal back.
Ensuring you understand these
vital features can significantly help you make informed decisions and align
your bond investments with your overall financial goals.
Also, keep in mind that bond prices and yields share an inverse relationship. When bond prices rise, yields fall, and vice versa. This is because the fixed interest payment of a bond becomes more attractive compared with the market when prices drop, increasing the yield.
Conversely, if
bond prices increase, the fixed interest payment is less attractive, reducing
the yield.
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