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In searching for good investments I've come across some bonds with pretty good interest rates (5% or higher). Is it safe to invest in these? How does risk compare with buying stocks?
Hi there,
As a general rule, the higher the interest offered, the higher he risk involved. When you buy a bond, you are essentially lending the bond's issuer money. As with all other loans, borrowers with good creditworthiness generally pay little interest because they are a secure investment. Borrowers with poor creditworthiness pay higher interest because they are more desperate to find lenders who are willing to take the risk in lending them money.
As a general rule, high-yield bonds are best suited to investors with relatively high risk tolerance. If you shy away from risk, you may be better off investing in low-yield medium term notes, fixed term deposits or a savings account.
Best regards from Moneyguru
