InvestmentGradeBonds.net

If you are interested in making the most possible money from bond investing, you will probably want to choose high-yield bonds, also known as junk bonds. Junk bonds can carry a tremendous amount of risk, so they should play a limited role in your portfolio unless you are very willing to accept a high level of risk with your investments.

Even investment-grade bonds may not return the full principal if you choose not to hold it until maturity. If you buy a 20 year U.S. Treasury bond and you only hold if for 10 years, you may lose a very large portion of your principal.

Why? Well, if you choose to sell early, you have to sell on the open market to other investors. You can’t call in your investment early from the original issuer. Bond prices can fluctuate by great amounts, even with U.S. Treasury bonds, so your bond is only worth what another investor is willing to pay.

So if you are going to invest in bonds, you have to realize that you need to hold on to them until they mature if you expect to receive your full principle back. Otherwise, you could actually lose money on them.
If you choose to invest in high-yield bonds, remember that to offset the risk, you need to diversify the rest of your portfolio. Never invest more than a small percentage of your overall portfolio into junk bonds, because you would risk losing too much.

If you’re going to invest in junk bonds, be sure to choose bonds that have a relatively short maturity. Remember, the longer you hold on to bonds, the greater the chance of default. If you can buy bonds with a shorter maturity, you’re more likely to get your principal back when the bond matures.