Introduction: What are High-Yield Bonds? High-yield bonds, also known as "junk bonds," are debt securities issued by corporations with lower credit ratings. These bonds offer higher interest rates compared to investment-grade bonds, compensating investors for the increased risk of default. This guide explains high-yield bonds, their benefits, associated risks, and strategic considerations for effectively managing them within your portfolio. Characteristics of High-Yield Bonds Higher Interest Rates The primary attraction of high-yield bonds is their significantly higher interest rates, providing investors with potential income advantages compared to safer government or investment-grade corporate bonds. Lower Credit Ratings High-yield bonds typically have ratings below investment-grade (below BBB). These lower ratings reflect a higher risk of default but also offer greater yield potential. Benefits of High-Yield Bond Investing Enhanced Income Potential High-yield bonds offer ...
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