| typical independent investor will never be able to | | | | reward. Interest payments are typically protected |
| understand every aspect of bond investing. | | | | by a large or exceptionally stable margin and the |
| Research on bonds fills volumes. It is for this | | | | principal is believed secure. |
| reason, therefore, that you do as much research | | | | 4. BAA Bonds |
| as you can prior to investing, and if you can, take | | | | These are medium grade bonds and as such they |
| advantage of professional investors that can | | | | are neither highly protected nor yeild a very high |
| manage a portfolio for you. | | | | amount of return on your investment. BAA rated |
| 1. Bond Ratings | | | | bonds are considered medium-grade obligations |
| Not all stocks are created equal - some are a | | | | (i.e., they are neither highly protected nor poorly |
| strong buy whereas others are holds or sells. | | | | secured). Interest payments and principal security |
| Bond ratings get assigned over 20 different | | | | are thought adequate at the time the rating is |
| possible designations, from AAA (Highest Grade) | | | | made, but might prove unreliable in the long run. |
| to C (May Be In Default) or worse. Also, those | | | | 5. B Bonds |
| designations are backed by some of the most | | | | Bonds with B rating are generally considered |
| thorough historical and technical research on the | | | | speculative. Interest and principal payments are |
| planet. | | | | not assured. In other words, invest at your own |
| 2. High Predictability Makes A Safe Investment | | | | risk. In general, bonds with higher ratings tend to |
| Bonds always have an associated interest rate | | | | have lower yields, so B bonds can actually give |
| and a set maturity date. This makes bonds more | | | | you a higher return on your investment. In 1991, |
| predictable. Those two factors alone makes | | | | for example, those who gambled on lower rated |
| possible the use of an array of mathematical tools | | | | bonds reaped the highest total returns. |
| to provide predictions of future yields and price | | | | 6. Are Bonds Better Than Stocks? |
| with a confidence unmatched by any other | | | | Even at the lowest end of the scale, bonds |
| investment. | | | | outpace quite a few stocks. Of course, this is all |
| 3. AAA Bonds | | | | averaged out, and some stocks do much better |
| The absoulte best quality of bonds are ones that | | | | than even the highest bonds. Bonds also have a |
| are rated AAA. They carry the smallest degree | | | | large minimum investment in capital - $5,000 |
| of investment risk, and thus, the least amount of | | | | dollars, and so arent for your entry-level investor. |