Many investors today are looking at high investment yield bonds as a way to diversify their portfolio and keep their money relatively safe. High-yield bonds can be purchased by investors through individual issues or through high yielding mutual funds that specialize in corporate issues. The key behind higher yielding investment instruments is determining the difference between what is considered a 'junk bond' and what is considered a safe account. Safer bonds generally act like traditional savings accounts and many times are easy to locate even for the novice investor.
It is important to understand that many companies who issue bonds are large and well known and have fallen into junk status many times through their history. General Motors and Ford are well-known companies that have had this uncharacteristic event happen, but investors see it as a buying opportunity. Typically, companies such as these recover from an economic downturn and are able to begin paying high interest rates on individual issues of preferred stock, which has a positive impact on any corporate bond that was issued.
Municipal bonds are a great way to generate a tax free income which can produce higher yields than a traditional savings account. An investor can purchase them through short-term issues, which are referred to as notes and mature and pay interest in one year. The appeal of the municipal variety is the tax-free status the investor receives on any capital gains made on the instrument. The yield on a year-over-year basis almost always outforms a traditional bank savings account. Understand how these notes work and begin by looking for cities and counties that are issuing them to the general public.
Trying to obtain a high investment yield does carry with it a significant amount of risk. It can be a dangerous game if the investor is uneducated and uninformed. Because they are known as below investment grade, many professionals have a general tendency to stay away from them. On the plus side, they have generally been known to produce better returns than traditional ports. In any scenario, education and understanding of the markets is needed to continue produce positive returns.
Source by Thad Tinkelbaum