Venturing Into The World Of Junk Bonds

Over the past few weeks, I have been reading more and more about high-yield debt increasingly becoming the place to which many investors are flocking in search of yield. If you are interested in high-yield exposure other than through ETFs, individual bonds is another possibility. When buying individual junk bonds, keep in mind that prices can fluctuate quite significantly, even with much smaller moves in benchmark Treasury yields. This is because the further down in credit quality an investor ventures, the larger spreads to Treasuries become and the larger the movements in spreads. In other words, the lower one goes on the ratings scale, the more the market demands to be compensated for default risk. And, given the effects even small cyclical changes in the economy often have on companies with lower-rated debt, people invested in this type of debt should always be prepared for the possibility that spreads, yields,