How safe are corporate bonds?
It depends on the financial solidity of the companies issuing them. Credit rating agencies like Standard & Poor’s, Moody’s and Fitch research the risk of default, and assign grades both to issuers and to their individual bond issues. The highest ratings go to those companies which they think are least likely to default either on interest payments or on capital repayment. Ratings above a certain grade are referred to as ‘investment grade’, whilst those below are called junk bonds. As a general rule, the more risk the investor is being asked to take, the higher the yield of the bond. You can ask your broker what the credit rating of any particular bond issue is. I have heard that dealers can sell “short” to capitalise on the price performance of a stock. What does this mean and how does it work? Can dealers manipulate a company’s price by selling and buying back later when the stock has lowered? If so, is this legal? The term “short selling” relates to the sale of shares (or derivatives
