When you invest in a bond, you lend money to a government, public sector undertaking or company for a specified period in exchange for interest. But not all bonds are the same: they differ in terms of issuer, tenure, credit quality, risk and potential yield. Credit ratings such as AAA, AA, A and BBB help indicate the relative ability of the issuer to meet its repayment obligations, although they do not eliminate investment risk.
This is why bond investing isn’t just about choosing one bond. Investors can create a mix of different issuers, maturities and credit ratings depending on their risk appetite and financial goals. Read the infographic to understand how such a diversified bond portfolio can be structured, and how its different components can contribute to different levels of relative safety, risk, and potential yield.
Click to know more information on bonds and diversification Here.