Bonds

Regular income stream

Most bonds pay regular and fixed interest payments except zero-coupon bonds and floating-rate bonds.

Portfolio diversification

Bonds as an alternative investment product can help reduce risk concentration in any one asset class within a portfolio.

Caters to different risk appetites

Conservative investors can invest in high-grade bonds such as government bonds while investors with higher risk appetites can invest in high-yield bonds.

Default risk

An investor may lose all or a substantial part of the investment if a bond issuer defaults on payments.

Price and Interest rate risk

Bond prices have an inverse relationship with interest rates - higher interest rates would result in lower bond prices and vice-versa.

Credit risk

Deterioration in the credit quality of a bond issuer would affect its repayment ability, resulting in depreciation in the bond price.