I was looking into bonds with a decent yield, but I got a bit scared reading about defaults. What actually happens if the issuer defaults? Am I losing everything?
well, yeah, if they default, you might lose a part of your principal. But if the bond is rated well, the risk is lower, right?
It depends on the bond’s terms. Usually, you get something back during default proceedings, but it’s not guaranteed you’ll get everything.
So it’s not like stocks where you lose everything? But how much can you expect to get back?
I think if the issuer defaults, you’re not getting the full principal back, but it could be partially recovered depending on assets or insurance.
I’m pretty sure if the bond is rated well, you’ll get most of it back. But for lower-rated bonds, you might get nothing. It’s like an FD, no?
Not exactly like an FD. FDs have deposit insurance, so there’s a safety net. With bonds, it’s about how much the issuer can pay back, and that depends on their financial condition.
But if it’s rated AAA, I’m guessing I’m good, right?
Yes, generally with higher-rated bonds, you’re less likely to face issues, but it’s still not risk-free. AAA bonds can still face issues if the market tanks.
Honestly, no bond is fully risk-free. Just keep the ratings in mind. It’s more about how risky you’re willing to go.
Got it. So, AAA bonds are safer, but there’s always some risk involved.
Exactly. It’s about balancing risk with reward, but don’t treat it like a guarantee, even with top-rated bonds.