(3) Credit risk: If the bond issuing company fails to pay the bond interest or repay the principal on time, it will bring credit risk losses to bond investors.
(4) Re-investment risk: If you buy short-term low-interest bonds instead of long-term high-interest bonds, you may not find the high-interest bonds that you could have bought when the short-term bonds recover cash at maturity, thus creating re-investment risk.
(5) Recoverability risk: When the market interest rate drops, the previously issued high-interest bonds with recoverability clauses may be forcibly recovered, resulting in recoverability risk.
(6) Inflation risk: Inflation will reduce the real purchasing power of money, so during inflation, the real interest rate should be coupon rate minus the inflation rate. If the bond interest rate is 10% and the inflation rate is 8%, the actual yield is only 2%.
In view of the above different risks, the main preventive measures are:
(1) Considering the interest rate, reinvestment risk and inflation risk, you can buy bonds with different maturities and varieties by diversification;
(2) In view of the liquidity risk, we should pay attention to the analysis before investing and try to choose bonds with active trading. At the same time, be careful not to use all the funds for investment, and should prepare some cash for emergencies;
(3) In view of the credit risk and repurchase risk, investors should investigate the company when choosing bonds to understand its profitability and solvency. Generally speaking, the higher the issuer's credit rating, the less likely credit risk will occur and the more secure the income will be, but the interest rate of such bonds will be relatively low; On the contrary, the lower the issuer's credit rating, the greater the risk of bond repayment on schedule, and as compensation, its interest rate will be relatively high. Therefore, investors should comprehensively weigh the risks and benefits. Ordinary investors should try to avoid investing in corporate bonds with poor operating conditions or bad reputation. During the period of holding bonds, they should still pay enough attention to the issuing company in order to make the right choice in time.