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The way you invest in bonds for the short-term
or the long-term depends on your investment goals and time frames, the
amount of risk you are willing to take and your tax status.
When considering a bond investment strategy, remember the importance of
diversification. As a general rule, it?s never a good idea to put all your
assets and all your risk in a single asset class or investment. You will
want to diversify the risks within your bond investments by creating a
portfolio of several bonds, each with different characteristics. Choosing
bonds from different issuers protects you from the possibility that any one
issuer will be unable to meet its obligations to pay interest and principal.
Choosing bonds of different types (government, agency, corporate, municipal,
mortgage-backed securities, etc.) creates protection from the possibility of
losses in any particular market sector. Choosing bonds of different
maturities helps you manage interest rate risk.
With that in mind, consider these various objectives and strategies for
achieving them.
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