Weighted Average Credit Rating

DEFINITION of 'Weighted Average Credit Rating'

The weighted average of all the bond credit ratings in a bond fund. The measure gives investors an idea of how risky a fund's bonds are overall. The lower the weighted average credit rating, the riskier the bond fund. The weighted average credit rating is expressed as a regular letter rating (AAA, BBB, CCC).

BREAKING DOWN 'Weighted Average Credit Rating'

To arrive at the weighted average credit rating, the calculation starts with dividing the value of each bond in the fund by the total value of the fund. This gives the individual bond weights. The weight of a bond in the fund determines how much that bond influences the weighted average credit rating. For example, if a bond fund has 95% AAA government bonds and 5% junk bonds, the bond fund would still have a weighted average credit rating of AAA.

RELATED TERMS
  1. Japan Credit Rating Agency - JCR

    One of the key credit rating agencies in Japan. JCR provides ...
  2. Investment Grade

    A rating that indicates that a municipal or corporate bond has ...
  3. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  4. Junk Bond

    A colloquial term for a high-yield or non-investment grade bond. ...
  5. Credit Risk

    The risk of loss of principal or loss of a financial reward stemming ...
  6. Bond Fund

    A fund invested primarily in bonds and other debt instruments. ...
Related Articles
  1. Mutual Funds & ETFs

    Evaluating Bond Funds: Keeping It Simple

    Discover some of the key factors for determining a fund's risk-return profile.
  2. Retirement

    Bond Basics Tutorial

    Investing in bonds - What are they, and do they belong in your portfolio?
  3. Bonds & Fixed Income

    Advanced Bond Concepts

    Learn the complex concepts and calculations for trading bonds including bond pricing, yield, term structure of interest rates and duration.
  4. Mutual Funds & ETFs

    The 3 Best Vanguard Funds for Value Investors in 2016

    Find out which of Vanguard's value funds are the best for building a solid core-satellite value investing strategy for your portfolio.
  5. Mutual Funds & ETFs

    The 4 Best American Funds for Growth Investors in 2016

    Discover four excellent growth funds from American Funds, one of the country's premier mutual fund families with a history of consistent returns.
  6. Investing Basics

    5 Questions First Time Investors Should Ask in 2016

    Learn five of the most important questions you need to ask if you are a new investor planning on starting an investment program in 2016.
  7. Mutual Funds & ETFs

    The 5 Best US Small Cap Value Index Mutual Funds

    Find out which index mutual funds do the best at investing in small-cap value stocks for higher potential returns at the lowest cost.
  8. Mutual Funds & ETFs

    The 5 Best T. Rowe Price Funds for the Income Seeker in 2016 (TROW)

    Find out which T. Rowe Price mutual funds to use to create a diversified income portfolio for current income, income growth and capital preservation.
  9. Mutual Funds & ETFs

    The 4 Best Vanguard Funds for Growth Investors in 2016

    Discover four mutual funds managed by the Vanguard Group that would be attractive for investors interested in investing in growth stocks in 2016.
  10. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
RELATED FAQS
  1. Are target-date retirement funds good investments?

    The main benefit of target-date retirement funds is convenience. If you really don't want to bother with your retirement ... Read Full Answer >>
  2. Do mutual funds require a demat account?

    A dematerialized account enables electronic transfer of funds. The account is used so an investor does not need to hold the ... Read Full Answer >>
  3. How many free credit reports can you get per year?

    Individuals with valid Social Security numbers are permitted to receive up to three credit reports every 12 months rather ... Read Full Answer >>
  4. How liquid are Vanguard mutual funds?

    The Vanguard mutual fund family is one of the largest and most well-recognized fund family in the financial industry. Its ... Read Full Answer >>
  5. Which mutual funds made money in 2008?

    Out of the 2,800 mutual funds that Morningstar, Inc., the leading provider of independent investment research in North America, ... Read Full Answer >>
  6. Does OptionsHouse have mutual funds?

    OptionsHouse has access to some mutual funds, but it depends on the fund in which the investor is looking to buy shares. ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center