South Florida Arbitration & Litigation Lawyer Blog
High Yield – Junk Bond Investment Loss – Florida Litigation and FINRA Arbitration Attorney:
A High Yield or Junk Bond is a bond with a credit rating of BB or lower by a recognized rating agency such as Fitch Ratings, Moody’s Investors Services, Morningstar Rating System and others. Although the term Junk Bond is commonly used, issuers and holders of such securities prefer the securities be call high yield bonds. Junk Bonds are usually issued by companies without long track records of sales and earnings, or by those with questionable credit strength. Since they are more volatile and pay higher yields than investment grade bonds, many risk-oriented investors specialize in trading them. The phrase “risk-oriented” being the operative term.
If you are an average investor, with fairly conservative investment objectives, these types of bonds are not for you. If you own these bonds, the current yield section of your statement, more likely than not, reflects a yield of around 10% or higher but compare that against the current market value. At the end of the day, especially when comparing the maturity of the bond to your age or when you might need the principal returned, what is more important, high risk yield or the protection of your principal.
Please keep in mind that the information being provided herein is for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If you have any questions concerning the contents of this post, you should contact a qualified professional.
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