Corporate junk bond mutual funds are usually those funds which have a lower rating, or in simpler words, the risk factor of investing in these bonds is higher. These funds may be offered at lower prices and in order to lure the investors, these are more commonly known as high yield funds.
These funds also promise to pay a higher rate of return so that the investors are attracted to them. But while opting for this high interest bond fund one should also keep in mind that there are chances that one may not get their money back which is invested in junk bond funds. Sometimes, these junk bond funds do not allow the investors to sell their bonds for a fixed period ranging from one to two years.
So while the junk bond funds may promise a higher return, the chances of the investors losing out their money are also high. In other words, the junk bond funds are similar to the equities where the returns may be fast and high along with a high risk factor.
But at the same time, for people who have money at their disposal to invest and wait for a reasonable amount of time, junk bond funds may not be bad. Also, the people who have sound and analytical knowledge about mutual funds may be prepared to invest in these funds. After all one cannot forget the fact that these very corporate junk bond funds had earned more than 30 percent as annual returns in the early 1900s. Hence, it is wrong to write them off but at the same time one needs to be well aware about these funds.
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