Long Term Government Bonds Risks and Benefits

Long Term Government Bonds

Long term government bonds can carry some investment risks, and these risks should be carefully considered and fully evaluated before any action is made for this type of bond. These bonds have a maturity date of a minimum of ten years to be considered long term choices. Short term government bonds carry different risks, because these mature much faster and are not held as long. One risk is a loss if you sell the bond before the maturity date, and this occurs when the bond rate is discounted. If the bond is held until the maturity date then this risk is not a large possibility. Long term government bonds are also affected by market fluctuations, and because they are held for a longer time these fluctuations can have a bigger impact on the investment.

A high degree of liquidity is one of the biggest advantages of investing in government bonds, because you can always sell the bond at any time before the maturity date is reached. Doing this could result in an investment loss though. The long term financial commitment required for long term government bonds can create financial difficulties and uncertainty in the future if this money is needed for another purpose. A big risk with the government bonds interest rate is inflation. While bonds that are short term are not significantly affected by inflation, those with longer terms can be susceptible to this factor.

It is possible to find long term government bonds from many different countries, not just the USA. When purchasing government bonds from foreign countries there can be additional market and economic risks involved. Australian government bonds are considered a good low risk bet and a conservative option the same way that the US government bonds are. Bonds issued by countries such as Greece and other countries experiencing economic turmoil or political upheaval may not be a good option though, because of all the additional risks involved.

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