Junk Bonds

What are Junk Bonds?

Bonds are instruments of debt issued by companies and governments in exchange for a specified interest rate.

Advantages of Junk Bonds

  • Value of the bond may appreciate
  • Income of Junk Bonds can be more reliable than stocks
  • High rate of income
  • Tax Free
  • Easy to liquidate

Disadvantages of Junk Bonds

  • May not beat inflation, meaning it may be worth less in a couple of years
  • Current bonds may lose value as the interest rate goes up, this may be a problem if you don't hold your bonds for maturity