Junk Bonds

Junk Bonds

Junk bonds are typically issued by companies that are either in trouble and need to raise cash or by companies that just want to raise cash without having to sell more shares of stock. As a result, they have a low rating and are considered high-risk investments.

Because they are high risk, junk bonds generally offer higher yields than other bonds to compensate for the additional risk. A safer way to invest in junk bonds is through a junk bond mutual fund. At least then you’re assured of a diversified portfolio that spreads your risk across various companies.