Risks of High-Yield Bonds
High-yield bonds, also known as junk bonds, can be extremely profitable for investors. However, they are not suitable for every investor. In fact, only investors who understand the risks of high-yield bonds and accept the fact that they could lose their investment should consider investing in junk bonds.
Below, we go into further detail about what high-yield bonds are, how they work, and what you can do to recover your investment if you lose money after investing in junk bonds.
What Are High-Yield Bonds and How Do They Work?
High-yield bonds have the potential to be a good investment for investors, but they are also very risky. Also known as junk bonds, high-yield bonds are bonds that have a high risk of defaulting. The bond is rated below investment grade and therefore able to produce high returns due to the high interest rate of the bond.
Put simply, think of a junk bond as a high-interest loan given to someone (i.e. a company) with a poor credit rating. If the company pays back the loan, the investor who purchased the bond will make their money back, with interest. But if they default, the investor may lose their investment altogether if the bond cannot be recouped.
FINRA Arbitration for Junk Bonds
High-yield bonds are not recommended for novice investors or those who are uncomfortable with high-risk investments. If your stockbroker or financial advisor suggested junk bonds without disclosing the risks, providing you with the information you needed to make an educated decision, or recommended high-yield bonds that did not align with the goals of your investment portfolio, you may have grounds for a FINRA arbitration claim.
Meet with an Investment Loss Lawyer
If your trusted stockbroker has wronged you by recommending that you invest in high-yield bonds when such an investment did not align with your portfolio objectives, contact a respected investment loss lawyer at Wolper Law Firm for help. Call us at 800.931.8452 or fill out the quick contact form on this page.