Corporate Bonds Risk
Investing in business
Corporate bonds are loans made by the individual investor to a corporation, usually for a fixed period of time, and with the promise of a fixed amount paid in interest. Although they are usually a safer investment option than buying share in a corporation, corporate bonds may come with a degree of associated risk.
Corporate bonds risk explained:
There may be instances where the corporation which you loan your capital to cannot pay either the interest owed, the capital borrowed, or both. This could happen if, for example, the corporation were to go bust. Before you make an investment you may want to check the credit rating of the corporation you are thinking of investing with. A corporation with a low credit rating is likely to offer higher potential return rates in a bid to attract investors. Conversely a corporation with a high credit rating is likely to offer lower return rates because of the lower associated risk that comes with your investment.
Like government bonds, corporate bonds are bought and sold on the stock market, so the value of such bonds may fluctuate. As a result, although you are likely to receive a fixed interest payment for your loan, the capital that you put in is not guaranteed and the amount that you receive back once you bond has matured may not necessarily be equal to your original investment.
For corporate bonds risk explained in greater detail, and to find out more about your bond investment options speak to an independent investment advisor:
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