A decided error has been perpetuated for many years in the lexicon used by both Wall Street professionals and Main Street average investors. It concerns the use of the term “junk” bonds. The term denotes bonds whose credit ratings are less than prime.
Because of the term’s public misconception, too many investors avoid these bonds, despite the fact they have an important role to play in an investor’s portfolio.
The risk of potential defaults can be completely minimized when the bonds are in diversified holdings such as low- cost mutual funds or ETFs. Defaults are factored into bond pricing, which, for the most part, can often provide excellent investment opportunities.
Moreover, the use of Duration Principles can make any bond investment portfolio easily managed.(See the Earl J. Weinreb NewsHole® comments and @BusinessNewshole at Twitter.)
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