Investors can purchase individual bonds and bond mutual funds. Holding bonds till it reaches maturity level reduces market risk.
Investing in bond mutual funds lets individuals diversify among many different bond issues, thereby reducing credit risk. Interest-rate-risk can be lessened down by investing in shorter-term bonds.
Before investing in bonds, the investors should carefully read the prospectus of the issue with specific consideration on the following:
If you hold the bond to maturity, you will get all your principal back. That's what makes bonds so safe. You can't lose your investment unless the entity defaults.
If you resell the bond at a higher price than you bought it. Sometimes bond traders will bid up the price of the bon beyond its face value. What would happen if the net present value of its interest payments and principals were higher than alternative bonds investments so everybody
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