Read the obligation
A bond’s issuer, maturity, currency, seniority and contractual terms shape its risk. An advertised coupon is different from the return an investor realizes after price changes, costs and credit events.
Understand the principal risks
Interest-rate changes can affect market value. An issuer may fail to pay, inflation may erode purchasing power, and selling before maturity may be difficult or costly.
Assess the portfolio role
Fixed income can serve different purposes, from liquidity planning to income objectives. The appropriate role depends on credit quality, duration, currency and the investor’s circumstances.