Is a mortgage-backed security something retail investors can buy?

Is a mortgage-backed security (MBS) something retail investors can buy?

Technically, yes, but they are designed to be sold to institutional investors in bulk (i.e. in increments of tens of thousands of dollars). You probably can't buy, say, $500 of an MBS. If you want exposure to the MBS market you can look at ETFs that invest in MBSs. Plus, there are thousands of MBSs out there covering millions of mortgages - how will you know which one to buy?

what can make MBS a bad investment?

The main risk of an MBS is prepayment/extension risk - meaning the risk that people pay more or less on their mortgages than expected. Both can be "bad" for different reasons. High prepayment can be bad because then investors get their principal back too soon, meaning they don't get as much "interest" passed through. This usually happens in a low interest-rate environment, so reinvestment must be done at lower rates. Extension risk is the opposite - the risk that people pay less on their mortgage than expected (some prepayment is always modeled in to an MBS, so it doesn't mean that they default, just that they don't overpay as much).