It’s a AAA Rated Bond – Should I just buy it?
‘Oh! I just heard of another scam’, Well, hearing this phrase in Global economy is more frequent than it ever should have been. You as an investor wouldn’t ever be completely aware of what might hit you next in these turbulent times, however, there’s really no harm in being prepared. In terms of safety and stability of funds, investing in bonds is generally considered to be safer as compared to other asset classes. Investors should always make a concoction of various investments as per his risk appetite and prevailing market scenarios. Returns on different kinds of bonds usually differs on basis of tenure, liquidity, safety, credit rating etc. Now a question will pop in your head that what is credit rating and who allocates the same. Let us understand the basics of rating and its different aspects. What is Credit Rating? A rating agency evaluates the creditworthiness of companies and government entities, especially their potential to meet principal and interest payments on their debts. The rating assigned gives an idea about the organization’s level of confidence that the borrower will be able to pay its debt obligations as agreed. In simple words, poor credit rating indicates higher risk because there are great chances that the entity will default in its payment and vice versa.