High-Yield Bonds (also known as junk bonds) are debt instruments issued by companies with lower credit ratings. Because these issuers carry a higher risk of default, high-yield bonds offer higher interest rates to compensate investors for the increased risk. They are suitable for investors seeking higher income and who are willing to accept greater credit risk and price volatility compared to government or investment-grade corporate bonds.
High-Yield Bonds are designed for investors who want higher income and better return potential than traditional fixed-income options. Here’s why they deserve a place in your portfolio: High-yield bonds offer significantly higher interest rates, making them attractive for investors seeking strong and regular income. They can help boost overall portfolio returns, especially in low-interest-rate environments where safer bonds deliver limited yields. These bonds also provide diversification benefits, as their performance is often influenced more by company fundamentals than by government interest rates. Additionally, investors may benefit from capital appreciation if the issuer’s financial condition improves or its credit rating is upgraded. In short, high-yield bonds are suitable for investors with a moderate to high risk appetite who are willing to take on additional risk in exchange for enhanced income and return potential.
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They offer higher returns because the issuers have greater default risk compared to government or investment-grade issuers, so investors are rewarded with higher yields.
Yes. High-Yield Bonds carry higher credit risk and price volatility, but they also provide the potential for higher income and returns.
They are suitable for investors with a moderate to high risk appetite who seek higher income and understand credit risk.
Yes. Since issuers have lower credit ratings, there is a higher chance of default compared to safer bonds, making issuer selection important.