How Do You Invest In Junk Bonds?
Junk bonds, also known as high yield bonds, are debt certificates issued by financially insecure companies. Because the companies are not blue chips they must pay higher interest to bondholders. Junk bonds are the same as regular bonds except they pay investors a higher return for taking more risk. In order to successfully invest in junk bonds you must have financial knowledge and a significant amount of capital for diversification. Step 1 Learn about the high yield market. Study the financial figures of individual companies to determine why their debt is considered to be junk. A good place to look for information are the bond rating announcements and reports put out by Moody’s and Standard & Poor’s. Step 2 Assess your financial situation. Determine how much money you can invest in the high yield market. Junk bonds should make up a small fraction of your portfolio, but you must have enough money to buy them from six or more companies. Step 3 Buy junk bonds for short-term gain when the
