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...
Many investors choose bonds to mitigate market risk through diversification. A well-diversified portfolio of bonds can offset some of the risk that comes with investing in stocks and mutual funds.
But bonds are not without their own set of risks. One way to deal with bond risk is to build a laddered portfolio.
Bonds carry a unique set of risks that investors should consider....
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