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2.6 Advantages,Disadvantages of Bonds

Let us now take a look at the advantages and disadvantages Bonds Market

Bonds are generally government issued.

Advantages

  1. Low Volatility – Unlike previous videos, which we place Low volatility in the Disadvantage, we place this in the advantage for Bonds. This is because Bonds are very steady. With the interest you get, you would expect Bonds to be nice a steady making it to be a good investment.

  2. Fixed Interest Rates – You will get confirmed upfront at the beginning of the Bond and it would allow you to retain that for the period of time of your bond.

  3. Legal protection – If the company that is issuing the Bond goes bankrupt, the Bond holders will receive the sum of money back. If the investment, for any reason, does not work, you will get the sum of money back.


Disadvantages

  1. Interest Rate Risk – Market prices of Bonds can decrease.

  2. Callable Bonds – The issuer of that Bond has the right to recall that Bond. If that happens then you would stop receiving interest for it. This is also where Legal protection would come into the picture to ensure you receive the sum of money back.

  3. Credit Risk – The issuers can default on the interest and principal repayment obligations if they run into risk. Also, if they run some trouble with the business, default can occur. This would then not be an ideal case scenario.


Let us move on to the next market.
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