Bonds can provide income and balance to a portfolio, but they are not interchangeable with cash. Bonds represent loans to governments or companies, typically providing interest payments and repayment at maturity. Prices can fall when interest rates rise, while credit quality and maturity influence investment risk.
Investment choices should reflect the investor's objectives, time horizon, ability to withstand losses and need for accessible cash. Fees and taxes can meaningfully affect net returns. Investors should know exactly which risks they are accepting in exchange for a bond’s yield.
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