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High yield bonds can entice investors with their juicy yields. But those yields come with risk. If you just go chasing after the highest yields there's a good chance you could find yourself experiencing some violent price swings. There's no questioning the fact that you really need to do your homework before jumping into high yield bonds.
Bonds that carry high yields do so because their financial prospects are poor and they need to pay up in order to get people to invest. Bonds with a poor backing can go south in a hurry though and the owner of such a bond can occasionally find themselves on the receiving end of a total loss.
But high yield bonds also have the potentially lowering the risk of your portfolio through diversification while at the same time increasing your returns. So you want to do it the right way. If you're looking to take the plunge there are a few routes you can take.
Your best bet for investing in high yield bonds will be leaving it to the professionals. Mutual funds give you diversification, professional management and a low cost entry into investing in high yield bonds. Most major mutual fund companies offer high yield bond funds and companies like Vanguard offer funds at a rock bottom expense ratio. That means more money in your pocket.
Another option is to invest using exchange traded funds. ETFs work similarly to how mutual funds work except that they're traded like stocks. ETFs usually offer an additional cost savings over mutual funds and they offer some additional flexibility by being available to trade throughout the day.
If you're really feeling like a gambler or you have a few specific issues you want to target, you can take a shot buying individual bonds. Individual bonds tend to carry higher costs to invest and may require a greater initial investment. Plus, you're placing all of your eggs in one basket.
High yield bonds can be lucrative but take care to invest wisely.
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What is the risk involved with high yield bonds?
The major risk with high yield bonds is losing all of your money you invest. These type of bonds have a very low rating much lower that the investment grade.
Who would benefit most from high yield bonds?
People with lots of money to invest benefit most from high yeld bonds as they can afford to absorb the hit in the case of failure without ruining themselves provided they did not invest all their money in one thing.
Where can one find high yield municipal bonds?
Someone that is looking for information on high yield municipal bonds, can do so by researching with websites such as About, Wikipedia, as well as Learn Bonds.
Why do junk bonds have high yield?
They also have high risk.
What is a high yield savings bond?
High Yield Savings Bond describes bonds that have high rates of return. These bonds are usually ranked low as they have a higher chance of defaulting.
What are the benefits of high yield bonds?
The best benefits of high yield bonds are they are issued by low credit organizations, they are a leading agency, and they work to protect your debt .
What word often describes high-yield bonds?
Junk
What is a good strategy to invest in municipal bonds?
There is no strategy to speak of. Municipal bonds are a low-yield, long-term sure investment, all characteristics of a safe investment.
What broker should I talk to about high yield?
You should contact your personal asset manager,who will best advise you on high yield bonds.
What are the bond types from lowest to highest yield?
The different types of bonds includes Treasury bonds which are released by US government. Agency bonds which are issued by organizations registered or affiliated with US Federal government, municipal bonds which are issued by counties or cities have medium to low yield, Corporate bonds which are issued by companies, have high yields, high yield bonds which are issued by corporations.
Why would a person invest in junk bonds-?
"Junk" bonds pay a higher interest rate than high-quality bonds, in order to compensate for the risk of default. junk bonds can pay very high interest rates (gradpoint)
Are high yield bonds safe and and are they insured by the Federal Government?
High-yield bonds are risky because they have lower credit quality and there are several events that could cause the price to decrease. They are not insured by the Federal Government.
