Reasons To Sell Before Your Bond Investment Matures

The way that you invest depends on your short-term or long-term goals, the time frame that you have, your tax status, amount of risk that you want to take and a number of other factors. There are a variety of bond investment strategies, including the popular diversification method. Diversifying your investments means that have several investments, instead of pooling all of your money into just one. Choosing a variety of different investment bond issuers is more likely to protect you when one issuer you are will cannot meet interest rate or principal obligations.

If you diversify into different markets e.g. government bonds, municipal bonds, corporate bonds, then you will have more chance of recovering from losses incurred in one particular sector. If you choose bonds which have different maturities, you can protect yourself from interest rate risks.

It may seem strange initially, but there are a number of circumstances that would lead you to want to sell before your investment matures. Although bonds are normally used for long-term investments, sometimes life does not work as planned and you may find yourself needing the principal investment amount back. Selling before maturity can sometimes get you near enough what you paid in the first place (dependant upon interest rates).

If the interest rates have decreased, the value of your bonds will have increased so you would have made a profit. If the interest rates have increased, you will have incurred losses. Selling an investment which is at a loss is a strategy that can offset the impact of tax on your investment gains.

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