Junk Bond ETFs: Understanding & Investing in High-Yield Bonds

The junk bond ETF is an alternative way for investors to get involved in the bond market. Here are the basics of the junk bond ETF and how it works.

Junk Bond ETF

This is a type of ETF that holds junk bonds as its underlying securities. The term ETF stands for exchange traded fund. This means that you can freely buy and sell these funds on the stock market. This makes them much more easy to trade than a traditional mutual fund.

Junk Bonds

Junk bonds are a type of corporate debt that is issued by a companies with low credit ratings. Corporate bonds are rated on a scale by financial institutions such as MorningStar. If the company has a bad credit rating, they will offer much higher rates of interest on their bonds. This is why many individual investors are drawn to investing in junk bonds.

Benefits of Junk Bond ETF

By investing in this type of ETF, you will be able to get around the complexities of the bond market. Many investors are intimidated by investing directly into junk bonds so they turn to this type of ETF. As long as you can buy and sell stocks with your online trading platform, you can purchase shares of a junk bond ETF.