Please read the following risk factors carefully before considering investing in any bond offering. Investing in bonds carries inherent risks, and it is crucial to understand and acknowledge these risks before making any investment decisions.
Market Risk: The value of bonds and the income derived from them can fluctuate based on various factors, including changes in interest rates, economic conditions, creditworthiness of the issuer, and market sentiment. As a result, there is a risk that the value of your investment may increase or decrease, and you may not receive the full amount of your initial investment.
Property Market Risk: Bonds related to real estate can be tied to the performance of underlying properties. If the real estate market experiences a downturn or if the properties securing the bonds face issues such as vacancies, low rental income, or declining property values, it can affect the value and returns of the bonds.
Liquidity Risk: Bonds may have limited liquidity, meaning they may not be easily tradable or may not have an active secondary market. If you need to sell your investment before the bond’s maturity, or before any anniversary of the bond, you may face difficulties in finding buyers, and the price you receive may be less than the initial investment.
Credit Risk: Bonds are subject to the risk of default by the issuer, which could result in a loss of principal and interest payments. The creditworthiness of the issuer, as determined by independent credit rating agencies, may affect the risk associated with the investment.
Inflation Risk: Inflation can erode the purchasing power of the interest income and principal payments from bonds. If the rate of inflation exceeds the rate of return on the bond, the real value of your investment may decline over time.
Interest Rate Risk: Changes in interest rates can affect the value of bonds. When interest rates rise, bond prices generally decline, and vice versa. This risk is particularly relevant for fixed-rate bonds. If you sell a bond before maturity, you may receive less than the face value if interest rates have increased.
Diversification: Investing in a single bond or a limited number of bonds exposes you to a higher level of risk compared to a well-diversified portfolio. Diversifying your investments across different asset classes and issuers can help mitigate specific risks associated with individual bonds.
Regulatory and Legislative Risk: Changes in regulations or legislation, including tax laws and government policies, may affect the bond’s terms, performance, and taxation implications. It is important to consider the potential impact of such changes on your investment.
Currency Risk: Investing in overseas bonds exposes bondholders to currency risk. Fluctuations in exchange rates may affect the returns on bonds denominated in overseas currencies when converted back into the home currency.
Please note, this list is not exhaustive and does not cover all potential risks associated with investing in bonds. Carefully evaluate your financial situation, risk tolerance, and investment objectives to determine whether investing in this bond aligns with your personal circumstances. It is strongly recommended that you seek advice from a qualified financial professional before making any investment decisions.