Compare the bond's quoted yield and price with similar exchange-listed bonds before investing, as small differences in pricing can meaningfully affect your eventual return.
Credit risk — the one that matters most
This is simply the risk that the issuer may not pay interest or repay your principal on time and in full. Government bonds carry very low credit risk because they are backed by the sovereign. Corporate bonds carry issuer-specific risk that varies widely, which is exactly what credit ratings (AAA down to D) are designed to help you assess. This is the one risk that applies regardless of whether you hold to maturity or sell early: if the issuer defaults, it affects you either way.
Liquidity risk — only relevant if you might sell early
This is the risk that you may not be able to sell a bond quickly, or at the price you expect, because trading activity in that bond is limited. It has little practical impact if your plan is to hold the bond until maturity, since you'll continue to receive interest payments and, assuming no default, your principal repayment as scheduled. It only becomes relevant when you need, or want, to exit before maturity.
Interest rate risk — also only relevant if you sell early
Bond prices move in the opposite direction to interest rates. When rates rise, existing lower-coupon bonds become less attractive relative to newly issued bonds, so their market prices tend to fall. When rates fall, the opposite happens. If you're holding the bond until maturity, these price movements are largely noise, because you'll still receive your coupon payments and principal repayment as promised. Interest-rate risk mainly matters if you plan to sell before maturity.
Reinvestment risk — relevant at maturity, or with callable bonds
This is the risk that when your bond matures, or is called early, prevailing interest rates are lower than before, meaning you cannot reinvest your money at the same attractive yield. It's particularly relevant for investors building a long-term income portfolio and for holders of callable bonds, where the issuer may repay the bond early precisely when interest rates have fallen and refinancing has become cheaper.
The practical takeaway: match risk exposure to your actual plan
If you intend to hold a bond until maturity, credit risk should be your primary focus. Liquidity risk and interest-rate risk are far less important because they mainly affect investors who sell before maturity. If there's a realistic chance you'll need to exit early, however, all four risks deserve attention, and liquidity in particular is something worth checking before you invest rather than after you need to sell.
Will you get your money back?
In government bonds, the probability is extremely high, since payments are backed by the government. In corporate bonds, the answer depends on the issuer's financial strength and credit quality. If a company fails to make an interest or principal payment, the bond is considered to be in default and recovery proceedings may follow. Bondholders may recover some, all, or none of their investment depending on the issuer's assets and the outcome of the resolution process. Secured bonds, which are backed by specific assets or collateral, generally provide bondholders with a stronger claim than unsecured bonds if things go wrong.