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