Can anyone tell me, is corporate bonds investment is a risky investment?
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Corporate bonds are debt securities issued by private companies in order to raise capital. As with any investment, there is some level of risk involved in buying corporate bonds. Some of the factors that can affect the risk of corporate bonds include the financial stability and creditworthiness of tRead more
Corporate bonds are debt securities issued by private companies in order to raise capital. As with any investment, there is some level of risk involved in buying corporate bonds. Some of the factors that can affect the risk of corporate bonds include the financial stability and creditworthiness of the issuer, the terms of the bond (including the interest rate and maturity date), and the overall economic environment.
In general, corporate bonds are considered to be riskier than government bonds because there is a higher risk of default. This means that there is a greater chance that the issuer will not be able to make the required interest payments or return the principal to the investor at maturity. However, the risk of corporate bonds can vary widely depending on the specific issuer and the terms of the bond. Some corporate bonds may be considered safer if they are issued by large, well-established companies with strong credit ratings, while others may be considered riskier if they are issued by smaller or financially unstable companies.
It is important for investors to carefully research and consider the creditworthiness and financial stability of the issuer before investing in any type of corporate bond. It may also be a good idea to diversify a bond portfolio by investing in a mix of government and corporate bonds, as well as bonds with different maturities and credit ratings. This can help to spread risk and potentially reduce the overall volatility of the portfolio.
AAA credit rating denotes the highest safety in corporate bond funds. Since you are investing for long-term i.e., fixed income investments, it is important to consider credit risk. Credit risk is a measure of relative risk that an issuer may not be able to pay interest and repay principal in full asRead more
AAA credit rating denotes the highest safety in corporate bond funds. Since you are investing for long-term i.e., fixed income investments, it is important to consider credit risk. Credit risk is a measure of relative risk that an issuer may not be able to pay interest and repay principal in full as scheduled. In general, investment grade bonds have a lower likelihood of default than below investment grade bonds and therefore, they are safer investments. This means that because AAA rated corporate bond funds have a low risk of default and higher chance of higher returns, this type of bond fund would be considered more appropriate for investment grade bonds.
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