Bonds can prove very practical to anyone concerned about capital preservation and earnings generation. Bonds likewise may assist partially balanced out the danger that comes with equity investing and often are suggested as part of a diversified portfolio. They can be used to achieve a variety of financial investment objectives. Bonds hold chance but, like all investments, they also carry risk.The primary distinction between these 2 ways of purchasing bonds also is essential to understand: When you buy a specific bond and hold it to "maturity," you will not lose your principal unless the bond provider defaults. When you invest in a mutual fund, however, the value of your financial investment changes daily your principal is at danger.