Are you looking for the best investing courses for corporate bonds? Corporate bonds (definition) are stalwarts in experienced investors and new investors portfolios alike. They’re a medium yield powerhouse that can deliver an attractive return in their own right.
The best investing courses for corporate bonds
Who are corporate bonds suitable for?
Corporate bonds usually make up 20% – 60% of a portfolio by value. The lower the proportion, usually the riskier the portfolio, as the balance is usually filled with equities, property and occasionally some commodities.
A diversified fund of corporate bonds is generally regarded as a low to medium risk investment, however some corporate bonds can be found at either extreme of the risk spectrum. I’ll give some examples below:
Low risk corporate bonds
Low risk corporate bonds may be the bonds issued by a company with:
- Strong financial performance, indicated by cash flow and accounting profits.
- Relatively low borrowings versus its assets, and a low interest charge relative to its profits and dividend payments.
- Operations in politically stable countries where the rule of law is upheld.
In other words, corporate bonds are considered low risk when the company is currently in a good financial position and this is unlikely to change in the future.
The closer a bond is to expiry (i.e. full repayment), the lower the risk, as there’s a lower likelihood of financial catastrophe occuring in a shorter time period compared to a longer time period.
Low risk corporate bonds will provide a return which is close to the risk-free rate, i.e. the rate determined by the market that investors will receive when investing in assets with little chance of default.
Medium risk corporate bonds
Medium risk bonds could be issued by a company with:
- Strong financial performance but medium amounts of debt, meaning that the likelihood of repayment would reduce noticeably if this strong performance did not continue
- A reasonable but less-than perfect credit rating, e.g. BBB
- Operations in riskier countries such as emerging markets
Medium risk corporate bonds may pay a return of 3% – 6%. This is a much better rate than you can probably receive from a bank account, but this is in exchange for taking on higher levels of risk.
High risk corporate bonds
High risk bonds could be issued by a company:
- With a credit rating of CCC or lower.
- In financial distress or in a vulnerable position in the market
- Which already has a high levels of borrowings, and may have already defaulted on bonds or loans in the past
- Located in higher risk countries, where assets are at risk of being seized by the political regime or competitors.
High risk corporate bonds are also known as junk bonds. If that name slightly alarms you, then that’s probably a healthy thing. Because of what I’m about to say next:
High risk corporate bonds may offer a coupon rate exceeding 8% per annum.
This might look like a great deal, because this could exceed by investing in the stock market. However, this is the rate you will receive only if the company can successfully repay the bond. You need to factor in the probability that the company could collapse and you could receive no further coupon payments on that bond.
How to find the best investing courses on corporate bonds
Head over to our investing courses page where we list the best investment courses for beginners and experienced investors alike.
You’ll find courses which cover a breadth of financial markets topics, as well as shorter and specialised courses designed for students with an interest in a specific asset type, such as how to invest in corporate bonds.