Investment Grade Ratings
Unlike investing in stocks or high-yield corporate bonds, investment grade corporate bonds are relatively safe securities. Unlike investing in CD's and other money market instruments, they offer a relatively high return. Backed by solid ratings and powerful financial foundations, investing in corporate bonds is a way to make money at a desirable pace. Poor market conditions however, may signify a bad time to invest in even the strongest investment grade bonds.
What are Investment Grade Corporate Bonds?
Corporate bonds with high ratings are considered investment grade. Ratings are determined by independent private firms, with Moody's, Standard and Poor's, and Fitch being the main three providers. Both corporate and municipal bonds are subject to this rating system to give investors an idea of the credit worthiness of a company or institution. Standard and Poor's, for example, labels high-quality investments as either AAA or AA, medium level, but still considered investment grade bonds, are A or BBB.
Corporations given stellar ratings are generally strong, dynamic, successful businesses. General Electric and Citigroup are examples of issuers with high ratings for their debt. Governments may also back bonds of certain companies to minimize the risk involved and to help attract investors. Because of a higher yield than very safe investments such as Treasury bonds, investment grade corporate bonds are ideal for investors who can afford some level of risk.
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