Some Disadvantages of Bonds

Suba

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When we invest in bonds, we not only study the advantages, but we also really need to study some of the disadvantages of bond investment so that we can minimize risks, such as:
1. Potential for failure to pay
Default can occur if the company goes bankrupt so it does not have the ability to pay interest and principal on loans or nominal bonds.
2. Interest rates change
For types of bonds with changing interest rates, there will be a tendency for the interest to become smaller in line with market interest rates.
3. Illiquid
The interest we earn from bonds cannot be withdrawn at any time.

 

SHAHID987

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Here we have different concept of bonds, as Government issues it. We just need to purchase it and after every three months government announced it's draw. If we win then we get the money, if not then our money remain save. Whenever we want we can easily cash it.

 

Suba

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In my country there are two types of bonds issued by the government, fixed rate bonds and variable rate bonds. Even though these two types of bonds are safe, they will provide different coupon/interest profits.

 

nomad

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• Feb 4, 2024

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Bonds give you guaranteed returns, however, compared to other markets and assets, bonds have lower returns. In my home country the average returns on bonds is just around 10 percent wheres as yo can earn 15 percent return on stock market.

 

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Bond prices are inversely related to interest rates, so if interest rates rise, the value of existing bonds will decrease. Bonds also may not keep pace with inflation, leading to a decrease in purchasing power over time.

 

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Stardom22

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I think that most of the bonds are very expensive to start. Mostly the low to middle income earners don't afford.

 

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• Aug 24, 2024

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Some disadvantages of bonds include;
- bond returns are volatile
- there is difficulty in selling bonds before maturity
- bonds interest is subject to taxation reducing net income
- unforeseen events like natural disasters can impact bond value.

 

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• Aug 28, 2024

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Credit risk is a concern with corporate bonds, as there is a possibility that the issuer may default on their payments.