No. of Recommendations: 0
It is not just a matter of a default. Bonds tend to go down when interest rates go up. Sure, you may get the face value of the bond when it matures, but that could be 10-20 years, and in the meanwhile, if you need money you may have to sell at a loss.

If you've invested in maturities for 10-20 years, you should have a cash source for earlier periods. Yes prices to go up and down, but the one thing you can count on is getting $1,000 for each bond at maturity. What you have to be satisfied with, is the return you lock in when you buy the bond.

Of course, you may have bought it at less than par, in which case if you hold to maturity, you will have a capital gain.

And this is bad because?

Or, you could have paid more than par for your bonds, in the case of a bond paying (on the face value) a higher interest rate than the current one when you bought.

This of course means you get to count a portion of each interest payment as return of principle, thus reducing the amount taxed.
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.