Ric Edelman: In this video series we're taking a close look at investing in bonds. When people get scared by the stock market, many of them sell their risky stocks and they load up on bonds instead. After all, what can be safer or a quieter place to ride out investment turmoil?
But it turns out that bonds aren't as safe as you think they are. Sure! They seem safer than stocks, but there is a lot that you need to know. The truth is that bonds face two big risks that can cause you to lose substantial losses.
Now if you think that owning bonds or if you're thinking about buying bonds, well, you need to be aware of these two risks; the first is interest rate risk. We will begin by talking about what happens when interest rates begin to rise and then we're going to take a look at credit risk. That's the danger you face when your bonds are downgraded.
And then in my final video, I will show you a smart way to own bonds that can help you limit your exposure to those risks.
Please keep in mind that all investments are subject to risks and fees, there is no substitute for consulting with a knowledgable professional. Carefully consider your objectives, risks, expenses, and tax implications before investing.