A long term bond is any bond maturing in longer than 15 years. These bonds have many attractive features, such as higher interest rates. However, they carry a greater risk due to market fluctuations in such a long period.

Price Changes of the Bond

You may want to sell your bond before it matures. This is common practice for those who enjoy trading in the market. The organization you purchase your bond from, whether a corporation or government body, will continue to issue bonds during the time your bond is active. If the price of these bonds go down and the interest rate stays the same, you will have a harder time selling your bond for a profit.

Inflation Risks

The interest rate on any investment is subject to inflation. If the rate is higher than the average rate of inflation while the bond is active, you will net a profit. If inflation is high, it may mean you actually lose money on the debt. Long term bonds should be purchased with inflation protection for this reason. Consider I-Bonds or Treasury Inflation Protected Securities (TIPS bonds) in order to assure inflation will not end up costing you valuable profits on the investment.

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