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Author: WendyBG Big gold star, 5000 posts Top Favorite Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35623  
Subject: Re: Where to find bond suggestions? Date: 6/18/2009 11:46 AM
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Please begin by reading the Bond FAQs. ---->

Be aware that the longer the time to maturity, the greater the change in the bond's value with changes in prevailing interest rates.

You may plan to hold the bonds to maturity -- but you may need to sell them at some point, either because the prospects of the issuer make you uncomfortable or simply because you need the money.

Longer time to maturity also increases the risk that inflation will rise and erode the value of the interest (and therefore the bond's price will also drop). I clearly recall how, in 1979, the value of 8% bonds fell to half their par because inflation was running at 12%.

To eliminate inflation risk, I buy Treasury Inflation Protected Securities (TIPS). I just wrote a Fool Wiki about TIPS, FYI.

The yields are much lower than corporate bonds, but Treasury bonds have less risk than even the strongest corporate bonds (cf. GE).

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