What are various risks involved in bond investment, and what are recommendations for techniques to reduce these risks? Investment in bond assures...

Bonds are considered the least risky investment apart from
putting your money in the bank. But to say that bonds carry no risk at all is not correct. There
are three risks in bond investment. First, there is the risk that bonds may default. This
scenario is highly unlikely but, in our changed economic climate, it needs to be said. For
example, cities and states are running out of money and they may need bailouts. Second, bonds may
have low interest rates, even if they are steady. This can be a risk as well in view of
inflation. So, for example, if the price of oil rises and this causes everything that needs to be
transported to become more expensive, then the yield in the bond may not be big enough to counter
the inflation. This is a real possibility in our world. Finally, you may be locked in to a bond
when other investments have much more potential to go up in value. How do you reduce risks? Two
things: Education and diversification of your investment portfolio.