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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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