Country Risk

Ever drive through rural South Dakota and get a craving for a Starbucks? That's one form of country risk.

Another form has to do with investing. Specifically, investing in government bonds. It's the risk that a particular country will default on its debts.

Buy bonds from the U.S. and U.K., and your country risk is very small. Something terrible would have to happen (zombie plague, alien invasion from outer space, etc.) for those countries to default.

But look to score some high yields in a place like, say, Venezuela, or any number of countries in central Africa. Then your country risk is pretty high. But again, you're (hopefully) getting compensated for this risk with higher returns.

A lot of things go into figuring out a nation's country risk. Its economic prospects, the strength and structure of its government, and its political situation. If rebels have surrounded the capital and the nation's lifelong dictator has just taken a private jet to Dubai...that's not a good sign.