Junk bonds or good investment.

In case you don't want to read any further in the article to answer the question in the title, it's a good investment. Every investment portfolio, as part of diversification, should include a good percentage of fixed income in the form of bonds. But when I've spoken with other people, many reject the so-called junk bonds, which are actually high-yield bonds.

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The problem lies in the fact that most people don't have large sums of money in their portfolios, and to invest in high-yield bonds, you need to be able to diversify across issuers. Otherwise, what can happen is that a default causes you significant losses that aren't offset by the other issues, and that's where the disappointment comes in. After the disappointment comes the complaint, and that's why these bonds have a bad reputation. However, as you can see in the image, the return on this type of investment is lower than that of stocks, but with much less volatility, and I would venture to say, with much less risk.

So how can we take advantage of this product if we can't buy many of these high-yield bonds? By buying funds. In my case, I use passive index funds, or ETFs. I prefer those with distribution for tax reasons, but there are many types. With portfolios of more than 500 bonds, the risk of default is greatly mitigated, and it helps to balance our investment portfolios considerably. Do you invest in high-yield bonds? Or do you find it too risky?

Disclaimer.

This is not a purchase recommendation. I am not a regulated financial analyst. Under no circumstances should this information be construed as a recommendation to buy, sell, or hold a position.
You should be aware of the risks involved in investing and conduct your due research.
The information described here may not be accurate or may change at any time, so you should always check it.