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Is investing in Government Bonds still the safest choice?
A government bonds investment is normally looked at as a risk proof choice, one that may offer lower returns but that can help you protect against any risks in the real world. Because these bonds are backed by the full faith and power of the government, they are generally perceived as safe, but this may no longer be the case. Government bonds can include bonds from various different government agencies on all levels, and the theory that these are safer than other forms of investment is no longer true. One factor involved is inflation, and another is the strength of the United States dollar. The stock markets, and other riskier investment forms, can pose many more risks, but bonds are no longer the sure bet that they once were either, even United States Government bonds.
Although government bonds investment may not be considered a safe haven by many anymore, there is still a high demand for these bonds because of the lower risks involved. A lot has happened in the last few years, and this has changed the way that some investors view bonds, especially those issued by government entities. During times of high inflation bond yields can be terrific, but inflation has not risen much and the global economy is on the downswing. This has caused many investors to reconsider bonds as the safest possible investment, and there are other factors involved as well. Recently China expressed an intent to sell off their US Government bonds, because of a lack of faith in their investment value, and they are not alone.
Some states and cities in the United States are also seeing a decline in the value and popularity of their bonds. Some city government shave actually declared bankruptcy, and it is no secret that the state of California has been experiencing financial problems for years. Government bonds are no longer considered as safe and risk free as they once were, but they are still in demand and may be a safer option than many other ways to invest. Government bonds have always been used as a safe haven, and although this is slowly changing right now as long as the stock markets and other investment vehicles continue to be volatile it is unlikely that bonds will lose complete favor any time soon.
If you are considering a government bonds investment there are some things you should consider. These choices may no longer be considered a safe haven, but they can still be a good choice in many situations. If you are going to invest in bonds then do all of the necessary homework, so that you know exactly what you are investing in. Be realistic about your expectations, and understand that inflation may not rise any time soon. All of these factors can help determine whether government bonds are right in your specific situation. These choices are no longer the sure and guaranteed bet that they once were, but that does not make them a bad investment either.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.
|Bond Investment25 Mar 2010|