Chasing Yield In Junk Bonds Often Ends In Large Investor Losses
Every investor has different goals in mind when forming their investment portfolio. Your financial advisor makes investment recommendations they believe will help you achieve these goals after doing their due diligence. Many investors are recommended junk bonds as a way to secure gains, as junk bonds can produce high returns.
However, these types of high-yield investments can also be high risk and aren’t a suitable investment for many investors. Read on to learn more about what junk bonds are, how they work, why they’re risky, and what you can do to recover substantial-high yield investment losses. For individualized help, reach out to a trusted investment loss lawyer.
What Are Junk Bonds?
Junk bonds, also commonly referred to as high-yield bonds, are often touted as an easy way to maximize your returns; a low-risk, high-return investment, if you will. Unfortunately, any investment suggestion described as low-risk, high-return is a red flag.
Although it’s true junk bonds have the potential to produce high returns, there is a significant risk in purchasing high-yield bonds. Here’s how they work:
When you purchase a junk bond, you are essentially giving a loan to an individual or corporation that has a high interest rate. Then, when the issuer repays the loan, you make significant returns because of the exorbitant interest rates.
The Risk of High-Yield Investments
Although junk bonds can be a great way to generate high returns, they don’t come without risk. Remember, you’re purchasing a debt that has been rated below investment grade—you can think of it as a poor credit rating.
And why would a debt have a poor credit rating? Because the issuer is more likely to default on the loan. If such a default were to occur, you could wind up losing substantial losses.
Many brokers will recommend junk bonds without disclosing these risks. When this happens, you may be able to hold them accountable through the pursuit of a complaint with the Financial Industry Regulatory Authority (FINRA).
Contact a Respected Investment Loss Lawyer
If your broker recommended high-yield bonds that were unsuitable for your portfolio, and you suffered considerable losses as a result of their suggestions, you may be able to recover your losses.
Discuss your options for financial recovery with a qualified lawyer at Wolper Law Firm. You can schedule your free, no-obligation consultation when you complete the convenient contact form below or call our office at 800-931-8452.