Short Term Credit Ratings Can Help You in Investing Safely

As the investment options become diverse with regard to the geography and the nature, making a sound investment decision not only ensures the safety of your wealth but also result in the maximization of your wealth. The expert reviews of the entities, instruments, and the countries, etc done by many credit rating agencies by providing few short term ratings which assist the investors in analyzing the different risks or returns connected with that investment.

The credit rating service is a form of financial service provided by the different credit rating agencies around the world. It is the estimation of the credit worthiness of the borrower which is based on the history of repayment and borrowing. These ratings also take into account the asset availability, cash flows, management efficiency, liquidity, operational efficiency, etc before finally awarding the ratings.

These ratings in no way guarantee the loan payment or defaults by the borrower but merely provide the information on the credit risk attached with that particular entity. These ratings assist the investors in efficient monitoring of their portfolios by suitably adjusting their ratings as per the changed ratings. These ratings also assist the entities in their overall growth, reduction in the borrowing costs, encouraging large disclosures on financial information and help them in improving their payment discipline.

The short duration debt instruments are usually issued by government agencies and private organizations which rarely have a maturity period larger than one year. These are very liquid instruments like the banker’s acceptances, treasury bills, commercial papers, certificate of deposits, etc and provide excellent options of investments on the short term basis. These short term instruments are less risky but it is imperative to properly scrutinize these instruments as well as the borrowing entities for safeguarding your interests.

Many top credit rating agencies of the world like Standard & Poors, Moody’s Investor Services, etc usually provide with only short term ratings on different debt instruments having maturity of less than a year. Each credit rating agency has its own individual assessment procedure and own rating symbol which indicates its opinion on the entity/ instrument.

To develop an accurate understanding of the risk attached to these target instruments, having in-depth knowledge of the symbols used for ratings and their indications is crucial.

Though these short term ratings would provide you with an expert opinion on the entities and debt instruments, yet these kinds of ratings are not fully devoid of the shortcomings and errors. It is very essential for the investors to use their own prudence for the proper scrutiny of the economy and entity, etc before making any investment.

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