Introduction
High-yield bonds, also known as junk bonds, are fixed income instruments that offer higher yields than investment-grade bonds. These bonds are issued by companies with lower credit quality, making them riskier investments. While the higher yields can be tempting, investors must carefully consider the risks before adding high-yield bonds to their portfolios.
Understanding High-Yield Bonds
High-yield bonds are typically issued by companies that have a higher risk of defaulting on their debt obligations. These companies may have a lower credit rating or may be in industries that are more vulnerable to market fluctuations. Due to the added risk, these bonds offer higher yields to attract investors.
