1. Bond prices move inversely with interest rates. So when rates rise, your bonds drop in value. This isn't a problem if you buy individual bonds and hold them until maturity. But it's a major risk for investors in bond funds, which price their shares according to the market each day.
| Row 0 - Cell 0 | How Well Do You Know Bonds? |
| Row 1 - Cell 0 | Anatomy of a Bond |
| Row 2 - Cell 0 | Best Buys in Bonds |
2. The silent wealth killer of inflation eats into the purchasing power of your investments and is often accompanied by rising interest rates. For now, the recession is keeping inflation in check -- and even leading to fears of deflation, a period of falling prices. But government efforts to stabilize the economy could lead to a period of above-average inflation once the recession ends.
3. The chance that an issuer won't pay you back at all is called credit risk. Treasury bonds have essentially no credit risk. Although municipalities occasionally default, credit risk for the tax-free bonds they issue tends to be low. For munis and corporate IOUs, an issuer's credit rating is your best tool for gauging credit risk (AAA or Aaa are the highest rankings), although those ratings are not infallible.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
4. Although falling interest rates drive prices higher, they aren't a blessing if an issuer can call its bonds, or redeem them early in order to issue new bonds at lower rates. In that situation, you're stuck with buying new bonds that pay less or finding something better to do with your money.
5. Occasionally a major event, such as a natural disaster or a leveraged buyout that leads to the issuance of more debt, will hurt a borrower's creditworthiness -- in turn lowering the value of its bonds. For example, the ratings of bonds issued by many airlines were downgraded in the wake of the September 11 terrorist attacks.
-
Best Banks for High-Net-Worth Clients 2024wealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2024: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2024.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
