Investment grade bond investing concerns bonds that according to Standard and Poor's, have a credit rating of BBB- or higher. Other credit ratings agencies have similar criteria and these can be checked on line. These are bonds that are viewed as having a good likelihood of fulfilling their financial obligations and banks are therefore permitted to invest in them. They may also provide a suitable way to invest money for other organizations or private individuals.
At the top end of the scale are the first class government bods which are the most risk-free opportunities for investing money. Bonds with an acceptable credit rating, as described above, still involve some risk to investors. At the lower end of the scale, bonds that do not meet those grades are variously called high yield bonds or junk bonds.
The difference between the rates of the first-class bonds and investment grade bonds gives an insight into how stable the markets believe a particular economy to be. The wider the discrepancy in the rates, the less stable the economy. Naturally, credit ratings can change significantly, particularly in the current economic climate.
These types of investments are not considered as risky as buying stocks. The former are usually the chosen option for those seeking a regular income from interest payments. However, fluctuating interest rates can cause havoc with the value of your investments. This is because as interest rates go up, the value of bonds goes down. This is explained by the fact that new issues will give the purchaser higher yields than older ones.
The sensitivity of bonds to fluctuating interest rates is augmented where longer term bonds are concerned. Shorter term ones are therefore more secure. Bear in mind that it is not appreciation in the value of the asset that is important for a potential investor, but rather, the interest payments that come in on a regular basis. It also allows for the preservation of capital, of course, since it is not available to be spent.
When looking for a quality investment tips, make sure that the company selling to you has a broad market sector strategy. Look for a company that has built up a loyal group of investors over time. Such a good reputation only comes from a consistent approach in the strategies used.
You bond fund managers must be highly experienced. Risk can be minimized by employing managers who possess varying investment styles. Those managing your bonds must have a reputation for underestimating the anticipated interest rate that will be paid on your investments.
Companies in this business with have full details of their terms and conditions on their web site so there is no excuse for not reading the small print. At a time when debt is a way of life across the world, these investments can look attractive but repayment on the lump sum invested is not secured. Investment grade bond investing should not be entered into without a full understanding of the fund objectives, the various risks, the fees payable to the business managing the investments, and any insurance costs, to mention but a few vital points.
At the top end of the scale are the first class government bods which are the most risk-free opportunities for investing money. Bonds with an acceptable credit rating, as described above, still involve some risk to investors. At the lower end of the scale, bonds that do not meet those grades are variously called high yield bonds or junk bonds.
The difference between the rates of the first-class bonds and investment grade bonds gives an insight into how stable the markets believe a particular economy to be. The wider the discrepancy in the rates, the less stable the economy. Naturally, credit ratings can change significantly, particularly in the current economic climate.
These types of investments are not considered as risky as buying stocks. The former are usually the chosen option for those seeking a regular income from interest payments. However, fluctuating interest rates can cause havoc with the value of your investments. This is because as interest rates go up, the value of bonds goes down. This is explained by the fact that new issues will give the purchaser higher yields than older ones.
The sensitivity of bonds to fluctuating interest rates is augmented where longer term bonds are concerned. Shorter term ones are therefore more secure. Bear in mind that it is not appreciation in the value of the asset that is important for a potential investor, but rather, the interest payments that come in on a regular basis. It also allows for the preservation of capital, of course, since it is not available to be spent.
When looking for a quality investment tips, make sure that the company selling to you has a broad market sector strategy. Look for a company that has built up a loyal group of investors over time. Such a good reputation only comes from a consistent approach in the strategies used.
You bond fund managers must be highly experienced. Risk can be minimized by employing managers who possess varying investment styles. Those managing your bonds must have a reputation for underestimating the anticipated interest rate that will be paid on your investments.
Companies in this business with have full details of their terms and conditions on their web site so there is no excuse for not reading the small print. At a time when debt is a way of life across the world, these investments can look attractive but repayment on the lump sum invested is not secured. Investment grade bond investing should not be entered into without a full understanding of the fund objectives, the various risks, the fees payable to the business managing the investments, and any insurance costs, to mention but a few vital points.