Before Purchasing Existing Corporate Bonds

• The issuer’s credit range
• The issue’s seniority
• The call and refunding provisions. You may avoid losing principal by not buying premium-priced bonds with larger coupon-rates than the market rates which could be called at lower prices. in other words, check if premium-price surpasses the call price.
• The sinking fund provision
• Whether you have a “poison point” protection against event risk
• Whether the bonds are part of a small issue (less than $75 million). Avoid buying small issues bonds.
• Whether bonds are listed or negotiated over-the-counter
• Bond?s maturity. While longer the term of maturity, larger the risks. Every once in a while corporations issue bonds with terms from 50 to 100 years maturity. Within these periods many things may happen and affect the companies abilities to repay. For example, Disney Corporation issued 100 year-bonds, whose maturity for the next generation?s children and grand-children. With this span, stocks are a better investment.
• Risk-averse investors should buy good-quality corporate bond issues.

Investing in corporate bonds require great amounts of money to create a diversified portfolio to minimize default risks. If you want to invest in junk bonds, you shouldn?t invest the largest part of your funds in this category.

Compare the corporate issue coupon yield with the yields offered on treasures and government agency bonds with similar maturities to see if the spread warrants the additional risk of exposure to corporate bonds.

If you are risk-averse you should avoid junk bonds and choose high-quality corporate bonds.

Beginner Money Investing Corporate Bonds and Risks Purchasing Corporate Bonds Before Purchasing Existing Corporate Bonds The risk of corporate bonds