Junk Bonds are high yield bonds issued by companies that are considered highly speculative because of risk of default. Due to their higher risk level, most investors should avoid junk bonds.
You know you shouldn't. Your CPA wouldn't approve. Your wife would be furious if she found out. The guilt would consume you. Still... you can't help casting a lustful glance at Junk Bonds with their 10-12% rate of return. Just remember... flashy investments usually go up in smoke, and when these babies fall, they fall hard. They're called "junk" for a reason.
A great explanation of junk bond ratings by Clifford G. Dow, a Chartered Financial Analyst. Stop by the site, print this page, and keep it for reference.
"Everyone agrees that one should not put much of one's wealth into junk bonds" states this site. I couldn't agree more!
High yield or junk bonds are bonds issued by companies that are considered a higher credit risk. This article explains how junk bonds came into prominence in the 1980's, led by Michael Millken.
An article from CNN Money answering the question, "How risky are junk bonds over a two to three year period?".
Wall Street prefers to call junk bonds "high-yield bonds." But junk is probably a better name. Junk bonds are long-term, interest-bearing IOUs issued by companies with poor credit ratings — or none at all. The bonds pay high yields because that's the only way to get investors to buy them.
A page arguing that investors are better off investing in undervalued common stocks than junk bonds. Only four or five paragraphs.
A list of ratings assigned to junk bonds by the major rating agencies.
