What are the possible risks associated with Bonds?
While bonds offer a generally low-risk compared to equity investments, there are still potential risks to consider, a few of those include:
Interest rate risk: This is the biggest risk for all bonds. If interest rates rise after you've purchased a bond, its price will fall in the secondary market. This means you might experience a loss if you choose to sell before maturity.
Credit risk: The issuer of the bond could default on their payments, meaning you wouldn't receive your interest or principal amount. This risk is higher for corporate bonds with lower credit ratings.
Liquidity risk: Some bonds, especially those issued by lesser-known entities, may be difficult to sell on the secondary market before maturity. This can be problematic if you need to access your cash quickly.
Market risk: Economic and market conditions can impact corporate bonds. Downturns can affect a company's ability to make payments or the bond's market value.
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