An investor may not be able to reinvest cash returns from an investment at the same level of return with the same amount of risk. This uncertainty about what kinds of returns will be available in the future is the reinvestment rate risk. Thus, even investors who hold bonds to maturity must ultimately face up to changes in the interest rate environment. One way many large investors cope with reinvestment rate risk is to establish a rolling bond portfolio. Such a portfolio includes bonds with varying maturity dates, so the whole portfolio won't roll over at once.
Many bonds have call features, which give the issuer the right to retire the bond prior to maturity.
In such cases, the issuer is enabled, during specific time periods, to call, or repurchase, a bond away from its owner at a preset price that represents a small premium. The action is entirely at the election of the issuer, with no recourse to the holder. Issuers like the call feature because it gives them opportunities to refinance portions of their debt if interest rates decline. Because of call features, bond investors can be hurt by both rises and declines in interest rates. Regardless of call features, when rates increase, the value of a bond will typically fall, as a means of adjusting its effective yield to that of alternative investments.