Elaborate on the various risks invloved in bond investment and recommend the techniques to reduce these risks.  

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readerofbooks | College Teacher | (Level 2) Educator Emeritus

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This is a good question and one that is important in this economic climate. When municipalities are even defaulting, there seems to be very little in terms safe havens. Some dangers that one should be aware of is as follows. First, there is a real possibility of defaults even with bonds. Just last week, we had the largest municipality default in US history. Also it does seem like sovereign defaults are real possibilities with the Greek problem. So, one needs to be aware of possible defaults, which means one may only get a portion back of one's money.

In terms of strategies for keeping one's investment safe, I will mention two. First, one can get different types of bonds. Diversity here could be a very wise move. Also a person may want to get some short positions to keep hedge against possible downfalls.

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