High Yield Bonds
Investing in business
High yield bonds, also known as junk bonds, are a type of high risk corporate bond. High yield bonds occupy the opposite end of the bond market to investment grade bonds.
When you invest in corporate bonds you loan your money to a corporation in return for interest payments. Once the bond or loan period is over you will usually expect to receive you capital back.
However, if a corporation does particularly badly or goes bust you could lose your interest and even your capital, making the distinction between investment grade bonds and high yield bonds will help you to recognise the different levels of risk involved in your investments.
While high yield may present a higher risk to your money, corporations will often promise the prospect of a high interest to capital ratio (yield) in order to attract investors into buying their bonds.
If you are willing to take the risk high yield bonds may be the right option for you, but it might still be a good idea to spread your investments in order to reduce the possibility of disaster. You should consider very carefully before investing in high yield bonds and you may want to speak to an independent investment advisor before proceeding:
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