Junk
Junk bonds should be avoided in most cases for most people. Why? P.S. A LOT of people own them and don’t even know it.
Junk bonds should be avoided in most cases for most people. Why? P.S. A LOT of people own them and don’t even know it.
Junk bonds (bonds issued by corporations or municipalities will a sketchy balance sheet that could cause them to fail and not pay interest on their bonds) should be avoided because they are just as risky as stocks (can drop in value by quite a lot over a short period of time) without the big upside. If you want to take more risk with your portfolio, own more stocks, don’t do it with risky bonds. The bonds you own should be of low risk (primarily government and high quality corporate) and of short to intermediate maturity.
Why do so many people own them and probably don’t even know it? Their “guy” has purchased high yield and high income funds (code words in the industry to make junk bonds sound better than they are) as he chases yield (they have to pay higher rates of interest because of their higher risk of default) or the unsuspecting investor buys these types of funds without even knowing just how risky they can be when markets turn against them. Stay away from junk bonds!