In an investment market that remains volatile astute investors are lured into the relatively risk free environment of Interest Bearing Debentures. This type of financial product is simple and attractive but do your home work before you put your money down.

Debenture stock is a fixed interest investment over a number of years. Interest is paid and the principal returned at the end of the term.

Do not be swayed by glossy brochures and persuasive advertising. You need to check the basics. Here is a list of points to look into before you invest.

The size of the company is important. Look for companies that are worth $50 million and up. This way you can be sure that they can look after your money well. A company of this size will have the IT systems, management and staff capable of doing the job well.

Ask where your money is to be invested. You have a right to know this. Investment placement dictates the rate of return and also the level of risk attached.

Weigh up the risk versus reward. It may not be easy to see but a comparison of the interest rate they offer you the client compared to the rate at which the company lends out will shed light on how risky their policies are. The bigger the difference between the two rates the bigger the risk to you.

How good is the asset backing? Is the debt secured or unsecured? What is it secured against? It sounds almost laughable to say this but yes mortgages are still the safest.

Finally equity levels represent a buffer zone. They tell you how well a company will be able to absorb defaults on their loans and still come out ahead.

It has to be said that companies that came out looking clean after the meltdown have pretty much earned a reputation for doing things right and should offer the best security.