What are the risks associated with a bond?

Bonds are also subject to various other risks such as call and prepayment risk, credit risk, reinvestment risk, liquidity risk, event risk, exchange rate risk, volatility risk, inflation risk, sovereign risk, and yield curve risk. A company's bondholders may lose much or all their money if the company goes bankrupt.

What are the disadvantages of a bond?

However, bonds have certain disadvantages. Bond: A bond is a debt owned by the enterprise to the bondholder. Fixed rate bonds are subject to interest rate risk, meaning that their market prices will decrease in value when the generally prevailing interest rates rise.

Why are some bonds better than others?

Some bonds are built for safety, while others provide more in the way of return in exchange for higher risk. Brian Baker covers investing and retirement for Bankrate. He is a CFA Charterholder and previously worked in equity research at a buyside investment firm.