Selection of Securities

One should carefully evaluate the following factors in selecting fixed income avenues.
Yield to Maturity : The yield to maturity for a fixed income avenue represents the rate of return earned by the investor if he invests I the fixed income avenue and holds it till its maturity.
Risk of Default : To assess the risk of default on a bond. One may look at the credit rating of the bond. If no credit rating is available, examine relevant financial ratios of the firm and assess the general prospects of the industry of the industry to which the firm belongs.
Tax Shield : In yesteryears, several fixed income avenues offered tax shield; now very few do so.
Liquidity :If the fixed income avenue can be converted wholly or substantially into cash at a fairly short notice, it possess liquidity of a high order.