The pros of bonds include a range of benefits for investors, such as: Lower risk. Bonds backed by issuers that can repay their debts are lower-risk investments than many other assets. For example, U.S. government bonds are backed by the full faith and credit of the U.S. government and typically pay interest and principal payments on schedule.
Why should you invest in bonds?
Portfolio diversification. Bonds offer a different investment profile because of their lower risk and income streams. Most investors use bonds to balance their portfolios against risky investments like stocks. The numerous types of bonds available also offer different risk and return profiles.
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.
