Successful investing has no secret formula. Since financial statements are basic tools of fundamental analysis, it is important to be able to read and analyze them.
There are many factors that individuals must consider when making investments in fixed-income securities. Current bond yields, current bond prices, and current as well as future interest rates all may have a big impact on the return of a fixed-income investment.
One other factor investors need to evaluate is the credit quality of the issuer and the particular bond. Individuals investing in fixed-income securities typically have two major concerns:
- How likely am I to get my money back at maturity? and
- How likely am I to get my interest payments on time?
Treasury securities, backed by the credit of the U.S. government, are regarded by most investors as “safe” in terms of these two questions, with no credit risk. But what about the credit risk of other issues and issuers?
Credit ratings offer one tool investors can use to help answer these questions.
Credit ratings and the agencies that issue them have come under heavy criticism for not properly assessing the creditworthiness of many recent securitized issues, as well as the...
Are you looking for an investment that has the potential to produce a growing income stream and long-term capital appreciation along with reasonable risk? Bond funds won’t suffice; their income is a prisoner of prevailing interest rates, and their capital appreciation in the long term is essentially zero, a combination that is exposed to inflation risk.
REITs (real estate investment trusts) come close, but the dividends from REITs...
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