Investing

Investing is the act of buying stock in a company and gaining a profit should the price of the stock go up before you sell it or losing money should the price go down. The same is true in bonds, but the difference is that the investor does not always have a clear idea of how much a bond is worth because unlike stock prices, the price of a bond is not shown on a ticker tape display and updated every few seconds.

Trading bonds is supposed to be a safer way to invest. However, when someone dreamed up the mortgage bond, no one fully understood the implications of the different elements of each mortgage that was then packaged with a hundred others. The use of FICO scores to rate the risk of a mortgage bond could be misleading since FICO scores rarely show the entire picture of...