The Basics

Why does the term of a bond matter when I think about risk?

The term of a bond matters greatly when you invest because of the length of time you must wait before the bond’s principal is paid back. Typically, shortterm bonds are less risky, since the principal is paid back sooner than higher-risk, medium- and long-term bonds. But to compensate investors, in exchange for accepting these risks, medium- and long-term bonds tend to offer higher returns and interest rates to bondholders.


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