High-Grade Investments

Source: Encyclopedia of Banking & Finance (9h Edition) by Charles J Woelfel
(We recommend this as work of authority and you can order it here)

Investments of superior merit, i.e., of low financial risk (risk of nonpayment if obligations, and risk of lack of earnings and nonpayment of dividends if equities).

Most obligations of governmental units and such bonds of seasoned corporations as are protected by well-established and adequate earning power, in addition to being secured by underlying mortgages if secured obligations, belong to this class.  In general, the securities of the Federal government, the states, and political subdivisions thereof, as well as the senior bonds of seasoned railroad, public utility, and industrial corporations, will be found assigned the highest investment rating, but variations in such quality will be found among the "municipals."  In their respective groups, the strongest preferred and common stocks may be characterized as high-grade.

To furnish a quick and convenient measure of quality, the statistical rating services – Moody's, Standard & Poor's, and Fitch – have developed BOND RATINGS to indicate quality; Standard & Poor's has developed quality ratings for stocks, both preferred and common.

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