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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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