Bonds: A higher yield may not mean a better deal

While bonds are considered a lower-risk investment, they're not infallible as recent corporate defaults across South-east Asia have shown. Stringent credit research and analysis could make the difference.

What's the first thing you'll ask about when considering investing in a bond fund? Chances are, the word "yield" just popped into your head. And that's understandable.

After all, most people think bonds are a lower risk anyway, so if you're going to invest, you'll want to know the return. However, what many people don't realise is that before you even start looking at yields, you need to ask: "Will the bond issuer pay the coupon and will I receive my principal back?"

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A version of this article appeared in the print edition of The Sunday Times on September 09, 2018, with the headline 'Bonds: A higher yield may not mean a better deal'. Print Edition | Subscribe