Is It Safe To Invest In Securities In Today’s Market?

Many investors ask the following questions; is it safe to invest in securities, stocks, or bonds? Which stocks to buy now? Can I invest in stocks now or will the market fall down more. Should I invest now or should I wait? Is my investment account safe? What’s going to happen with my 401K plan? These and many other questions are on the minds of many US investors who have taken a huge hit with the downfall of Washington Mutual and other financial stocks.

Stock recommendations in 2008 should be taken with caution. It may seem like you buy low and sell high is the recommendation we all try to follow, and the market is already low. Will the market fall more or should I buy cheap stocks now? What stocks are undervalued? Are financial stocks secure? What financial stocks are safe to invest it? Should I buy Wells Fargo stock? Should I buy CitiGroup stock? What are the best investments?

While it is difficult to predict the market moves, it seems like many financial stocks are currently undervalued. But which stocks should I buy? How to you find the winners and deselect the losers?

If you are considering investing right now, perhaps you have looked into debt securities investing. To understand debt security investing you need to get a grasp on understanding rates, yields, and prices of debt securities.

The Wall Street published information that will help investors understand the debt options and to make better informed investment decisions. Here are some incepts:

To understand debt options, an investor should understand the relationship between the rates or yields, which are difference ways of expressing return on debt securities, and prices of debt securities. Coupon interest rates of a debt security express returns as a percentage of the principal amount or par value of the security. Yields express return or projected return as a percentage of the amount invested. This relationship, simply stated, is that prices of debt securities more inversely to changes in rates. Declining rates, whether on long term bonds or money market instruments, will generally cause prices of outstanding debt securities to increase. Conversely, rising rates across a particular maturity spectrum will generally cause the prices of outstanding debt securities of that maturity to decline.

Example: a 30-year Treasury bond pays interest at a 12% coupon rate. The only time prior to maturity that investors will pay a price of 100 (that is, 100% of par value) for the bond is when the prevailing yield on such long term Treasury bonds is exactly 12%. Should rates move higher to, for instance, 14% for such Treasury bonds, the price of an outstanding 12% bond would have to decline to about 86 in order for the bond to yield 14%. If rates on such bonds subsequently decline to 10%, the price of the 12% bond could be expected to rise substantially above par, since it would yield 10% at a price of 120.

Price-based call options become more valuable as the prices of the underlying debt securities increase, and price-based puts become more valuable as the prices of the underlying debt securities decline.