A Corporate Bond is a debt issued by service, financial, and industrial corporations to finance operating cash flow and capital investments. The market for Corporate Bonds is larger than each of the markets for government agency securities, US Treasuries, and Municipal Bonds in terms of total face value of bonds outstanding.
There are many different types of Corporate Bonds including fixed rate capital securities, and high yield bonds. There are also many benefits to investing in Corporate Bonds including safety, diversity, and marketability. Corporate Bonds can also be an excellent investment instrument to offset risk in your portfolio.
Investing in Corporate Bonds can be a fantastic way to invest your capital, and an excellent addition to your investment portfolio. The financial professionals at online broker ETrade can assist you with Corporate Bond investing, and how it can work for your individual situation.
Investing In Corporate Bonds: Safety
A credit rating is assigned to a Corporate Bond based on the ability of the corporation to repay obligations and credit history. A high rating indicates a safer investment as measured by the probability of repayment of interest and principle.
When investing in Corporate Bonds it is important to consider the bond issuer’s credit rating which indicates the issuer’s ability to make all principle and interest payments on schedule and in full. Standard & Poor’s evaluate credit ratings for the majority of Corporate Bonds.
It is not only wise but easy to check a bond’s credit rating, and you can either ask your financial adviser, or check the credit ratings of Corporate Bonds at online brokerages such as ETrade.
“Investment grade” bonds are bonds rated BBB or higher by Fitch Ratings and Standard & Poor’s, and bonds rated Baa by Moody’s, meaning the quality of the security is high enough for a judicious investor to buy.
Investing In Corporate Bonds: Diversification And Marketability
When investing in Corporate Bonds you have the opportunity to choose from a variety of credit-quality characteristics, structures, and sectors to meet your individual investment objectives, time-frame for investing and risk-tolerance.
A bond’s marketability is determined by how quickly and easily a specific bond can be bought or sold. For a bond to have a high marketability, there must be a large number of dealers for a specific security as well as a large trading volume. The size and liquidity of the bond market make selling Corporate Bonds before they mature fast and simple.
Investing In Corporate Bonds: Additional Benefits And Considerations
Corporate Bonds typically offer higher yields than comparable maturity CDs or government bonds. The potential for higher yields is usually accompanied by higher risk. You can mitigate these risks by purchasing Corporate Bonds from companies with high credit ratings, from discount brokers such as Zecco, which can help you avoid high fees and commissions.
Corporate Bonds also afford investors a steady income from their investments, as well as capital preservation functions within your portfolio. Corporate Bonds are excellent instruments to balance out your portfolio by offsetting riskier assets, while still providing steady growth.
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