The negative side of investing in bonds:

All investment products have drawbacks. Bonds are no exception. Some of negative aspects of investing in bonds are:

Most bonds have a call option. This gives issuer right to call back bonds held by investors generally after five to ten years. When issuer calls back a bond, it pays your principal back along with accrued interest and perhaps, a small premium. Issuers adopt this strategy when they can obtain money at interest rates lower than that of bond in question.

When interest rates go up, price at which bond can be sold goes down. If you are forced to sell bond due to pressing circumstances, you may not back entire amount invested resulting in losses.

Long-term bonds can tend to be volatile and can somtimes fail to keep up with inflation.

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It is also important to evaluate firms history, how stable it is, etc. because if firm goes out of business chances are you might not be able to recover your money.

A good place to start figuring out what questions to ask of your broker is U.S. Securities and Exchange Commission homepage, they have a detailed page that outlines very good questions to ask. You could also check library for other investing resources. Make sure to take notes when you ask your questions and write down answers that you received, this shows broker that you are a serious investor.

Its important to consider that, as a beginner in investment world, you are sure to make mistakes. Everyone does, but its your ability to learn from these mistakes that will give you experience necessary to carry on and improve your results. The only logical way to learn from your mistakes is to write down everything you do, and evaluate it thoroughly. This way you will be able to acknowledge what mistakes you make, and help you avoid repeating them.

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