Investing in Bonds – Pricing Factors, Risks, and Diversification Benefits

This video covers the following learning objectives:

Describe the factors that affect bond prices

• Interest rate movements

• Credit quality of the issuer

• Time to maturity

• Inflation expectations

• Illustrated with real-world examples (e.g., bond price sensitivity, credit rating changes)

Explain the risks involved in bond investing

• Interest rate risk

• Credit/default risk

• Inflation risk

• Liquidity risk

• Reinvestment risk

• Each risk is paired with a practical scenario or outcome

Discuss how bonds can be used to diversify an investment portfolio

• Bonds reduce portfolio volatility during stock market downturns

• Provide stable income for retirees

• Help balance risk when combined with high-volatility assets

• Diversification demonstrated through crisis, retirement, and global exposure examples