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Are Investment Grade Securities a Good Bet in the Investment World?
When it comes to the different types of investment securities, how do investment grade securities rate? These securities have some of the lowest risks of default because of the higher grade and rating they have received. Any security which is rated BBB or higher is considered investment grade. Securitization news articles and reports from financial experts show that junk bonds and other low rated securities are not the best choice for many investors, because there are higher risks as well as the possibility for higher returns. This is not true with securities that are considered high or medium credit, because there are far lower default risks. This means that these investments are considered a good bet, and a much better choice than options which are rated lower.
Investment grade securities are named this way because they are the best choice for investors in most cases. Independent third party rating companies, including Standard and Poor and Moody’s, rate securities based on the potential for default. The rating given can range from AAA, which is superior, all the way to CCC and below, which is very poor with a high chance of defaults and losses. Investment grade securities help to minimize the risks involved to investors, by only including securities which are considered good bets and are unlikely to default. Remember that it is possible for the rating of a company or security to change at any time, and this can happen very quickly when significant changes take place which affect the credit rating of the company. One way to avoid this is to evaluate the breakdown for the quality rating given, and to reassess this factor periodically.
The information supplied in this article is not to be considered as medical advice and is for educational purposes only.