Final answer:
As you allocate more of your investment portfolio to bonds, you reduce your exposure to interest rate risk, but increase your exposure to market risk.
Step-by-step explanation:
As you allocate more of your investment portfolio to bonds, you reduce your exposure to interest rate risk, but increase your exposure to market risk.
Interest rate risk refers to the risk that the value of a bond may decline if interest rates rise. By allocating more of your portfolio to bonds, which have a more stable value than stocks, you are reducing your exposure to this risk.
However, bonds are still subject to market risk, which refers to the risk that the overall market will decline and impact the value of all investments, including bonds. By allocating more to bonds, you are increasing your exposure to this type of risk.