Business, Finance and Real Estate Blog

So the simple proportion of bond investments. It comes in the selection of bonds have a few things look. Bonds also have risks. One of the risks already mentioned: the counterparty risk. If a country or company in trouble, then the rating will be lowered and thus investors demand a higher return on their investment. The price will show a decline. It may even come so far that interest and / or redemption is no longer paid. This is called default. In any bankruptcy bondholders have the liquidation of a business might take precedence over shareholders.

The other risk that investors run with bond investments, the interest rate risk. If market rates rise, it drops the price of the bond on the stock market and vice versa. If interest rates rise investors demand a higher fee for their money and a bond will only be sold at a lower rate.