The disadvantages of corporate bonds: Although they are considered low-risk corporate bonds are not risk-free. The all-important ratings that are attached to bonds when they're issued can be lowered later due to unanticipated events. The worst-case scenario, a corporate bankruptcy, could erase your investment.
What are the pros and cons of bonds?
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.
What are the risks associated with the bond market?
The discount would have to make up the difference in the coupon amount in order to attract a buyer. Another risk associated with the bond market is reinvestment risk. A bond poses a reinvestment risk if its proceeds will need to be reinvested in a security with a lower yield.
