When buying bonds, you basically become a bank. You allow some corporation to get your money for a certain amount of time, and then they have to pay you back with interest.
You probably know that a bank looks at your credit rating before deciding whether or not to go ahead and give you a loan. Well, you have to look at the credit rating of a company to decide whether or not it’s a good investment.
There are several companies that can give you a credit rating, including Moody’s, Standard and Poor’s (S&P’s), and Fitch Ratings.
There is also the credit rating of countries, which is basically how well the country can foster a good economic environment for secure investments.
There is a technique for investing, and this is called dollar-cost averaging. Basically, what this does is allow you to lose less money if an investment goes sour by letting you buy allowing your broker to use a certain amount of money to buy a certain stock.
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