Investment grade corporate bonds
Understanding that I will not sell these until they mature- in my case 5 -7 years, what are the downsides to corporate bonds? I treat them like cd’s. I am currently getting anywhere from 3-4% as I bought these a couple years ago. I am not seeing a downside. Please advise and educate me.
Terry Says
The two downsides in any bond are:
1. The business is so bad they can’t pay interest.
2. Inflation returns and no one wants your old “low-yielding” bonds.
If you have TOP-rated bonds (not just investment grade,which goes down to BBB) you should be ok. I was warning that bond prices go up and down – -and that many bond funds hide a lot of low-rated bonds, which could be impacted by point 1 above in an economic slowdown.
