The Three R's of Bonds
Investor Education. To understand bonds it helps to learn the three Rs: Risks, Rates & Ratings. Consider the specific risks of a particular fixed income vehicle
Some Risks to Consider
Interest rate risk
Rates and Duration
The Importance of Credit Ratings:
In General, Bond Ratings Fall into Two Categories:
Investment Products & Strategies
A brochure outlining rates (and how they affect duration), risk and ratings when it comes to understanding bonds. Includes information about the specific types of risk to consider when investing.
Your financial professional can help you develop a long-term investment plan with a balance of strategies that addresses your need for portfolio growth, income, capital preservation and risk management.
All investments involve risk, including loss of principal. Past performance is no guarantee of future results. Indexes are unmanaged, and not available for direct investment. Index returns do not include fees or sales charges. Diversification does not assure a profit or protect against market loss.
All fixed income investments are subject to interest rate, credit and inflation risk. As interest rates rise, the price of fixed income securities falls. Investments in high-yield securities and in foreign companies and governments, including emerging markets, involve risks beyond those inherent solely in higher-rated and domestic investments. The risks of high-yield securities include, but are not limited to, price volatility and possibility of default in the timely payment of interest and principal. Foreign securities are subject to certain risks of overseas investing, including currency fluctuations and changes in political and economic conditions, which could result in significant market fluctuations. These risks are magnified in emerging markets. Convertible securities are subject to stock market, credit and interest rate risks. Mortgage backed securities involve additional risk over more traditional fixed income investments, including: interest rate risk, prepayment risk, implied call and extension risks, and the possibility of premature return of principal due to mortgage prepayment, which can reduce expected yield and lead to price volatility.
U.S. Treasurys are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasurys when the securities are held to maturity. Unlike U.S. Treasury securities, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.
Any information, statement or opinion set forth herein is general in nature, is not directed to or based on the financial situation or needs of any particular investor, and does not constitute, and should not be construed as, investment advice, forecast of future events, a guarantee of future results, or a recommendation with respect to any particular security or investment strategy or type of retirement account. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies should consult their financial professional.