High-yield bonds, also known as junk bonds, are bonds that are rated below investment grade by credit rating agencies and offer higher yields than investment-grade bonds to compensate for the higher risk of default. They are issued by companies or entities with lower credit ratings, weaker financial profiles, or less stable business operations. High-yield bonds can provide higher income compared to investment-grade bonds, but they also carry a higher risk of default and price volatility. Investors should consider their risk tolerance, investment goals, and overall portfolio diversification when deciding whether or not to include high-yield bonds in their investment strategy.
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