5 Risks in Debt Investments..! - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Monday, December 05, 2016

5 Risks in Debt Investments..!

Five Risks in Debt instruments..!

(1) Interest rate risk..!:

 When the market interest rate rises above the rate of a debt instrument, the demand for it falls and, hence, the market price of the debt product also falls.

(2) Inflation risk..!

 If inflation rates change during the lifetime of a debt product, interest payment fixed at a past date becomes inadequate in today's terms.

(3) Credit risk..!

 If the issuer of a debt instrument defaults on payments on the due dates, it results in a loss for the investor.

(4) Liquidity risk..!

 When the investor is unable to sell the debt product quickly as there are few buyers for it. He may then have to sell it at a lower price or wait till maturity.


(5) Reinvestment risk..!

 The reinvestment of periodic interest received may happen at a lower rate depending on the prevailing interest rate at that time.


 Centre for Investment Education and Learning (CIEL). http://www.ciel.co.in/#
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.

5 Risks in Debt Investments..! Reviewed by S. Chitra on December 05, 2016 Rating: 5 Five  Risks in Debt  instrument s..! (1) Interest rate risk..! :  When the market interest rate rises above the rate of a debt ...

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