Bonds are classified based on the likelihood that the issuing entity will be able to repay the loan at maturity – also known as default risk. In general, the higher the bond rating (and thus the lower the risk for default), the lower the interest rate.
Investment grade bonds are rated from highest (AAA, Aa) to lowest (A, Baa). High-yield bonds are riskier because they are issued by smaller or less stable companies. These are often referred to as junk bonds.
Our firm can help you implement your bond investment strategy if you think bonds are right for you.
In general, the bond market is volatile. Bonds entail interest rate risk (as interest rates rise, bond prices usually fall, and vice versa) and the risk of default. This effect is usually more pronounced for longer-term securities. Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds.
Any fixed-income security sold or redeemed prior to maturity may be subject to a substantial gain or loss. Your investment decisions should be based on your individual goal, time horizon, and tolerance for risk.
