A bond is a type of debt instrument, rather than stock. A bond fund holds various types of bonds. Bonds are rated for various aspects of their performance. High-yield bonds are so called because they pay higher interest rates than more conservative bonds, for one reason — there are others. These below-investment-grade bonds are also known as “junk bonds.” High yield bonds may perform well, on comparison, but higher yields also means higher risks. Junk bonds are likely to be affected by interest rate risk and credit risk and higher risks of default. These risks are often not adequately disclosed and their sale may be subject to securities fraud claims.
