Investing in individual bonds carries credit risk, as the issuer may default on their interest payments.

Investing in individual bonds carries credit risk, as the issuer may default on their interest payments.

Investing in individual bonds involves taking on credit risk, which refers to the risk that the issuer of the bond may default on their interest payments or fail to repay the bond's principal upon maturity. This risk is inherent in the bond market and stems from the fact that the issuer is contractually obligated to make regular interest payments to bondholders and repay the bond's principal at maturity.

The credit risk associated with bonds is determined by the creditworthiness of the issuer, which is reflected in their credit rating. Higher credit-rated bonds are generally considered to be less risky than lower credit-rated bonds. However, even highly rated bonds can carry credit risk, as the issuer's financial circumstances can change over time.

Investors should carefully consider the credit risk of any bonds they are considering for investment and seek professional advice if necessary. It is also important to remember that the performance of individual bonds can be affected by broader economic and market factors, such as changes in interest rates, inflation, and economic growth.

In summary, investing in individual bonds carries credit risk, and investors should carefully consider this risk when deciding whether to include bonds in their investment portfolio.