Junk Bonds Are Back! Here's What to Know

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Elizabeth O'Brien is a senior writer at MONEY

Have you heard? Junk bonds are back! Well, they never actually left, but now these bonds—the brainchild of Michael Milken in the 1980s—are having a moment. And no wonder: on average, junk bonds yield 4.8%, compared to less than 1.1% for bonds overall. That’s pretty attractive in today’s low-interest-rate environment. But increased reward always comes with increased risk, so understand what you’re getting into when you buy an individual junk bond or a high-yield ETF. These securities are sold by companies with less-than-stellar credit, so their risk of default is greater than bonds issued by highly rated companies. And that risk goes up in a bad economy. Many '80s creations (e.g., spandex, Nintendo) should be used in moderation, and junk bonds are no exception.

Best wishes,

Elizabeth

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ABOUT ELIZABETH

Elizabeth O'Brien is deputy editor at Money. She has covered retirement and health care for nearly a decade. A Brooklyn resident and mom of two boys, she navigates the alphabet soup of Medicare and the New York City subway system with equal ease. You can email her at elizabeth.obrien@money.com and follow her on Twitter at @elizobrien.

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Junk Bonds Are Back! Here's What to Know

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