Common high interest investments are: - High-yield Bonds: known colloquially as junk bonds, have speculative grade credit ratings. Minimum transactions are 6-7 figures. The capital value of these bonds are extremely volatile based on movements in interest rates and market and political moods.
- High-yield Bond Funds: often yield losses. The average 5-year returns are disappointing, invariably trailing their benchmarks due to fund expenses. Considering its risk, junk's average returns over recent years have been a mixed bag. When you include their 26% loss in 2008, junk bonds have returned an annual average of just under 6% by the end of 2009 -- the same as top-quality corporate bonds and only a whisker more than Treasurys. Extend the comparison back a full decade and the results are the same: The returns on high-yield bonds are no higher than those of safer bonds.
- Convertible bonds: Reverse convertible bonds are popular with European-based issuers. It has a period to maturity of one to two years and allows the bond's issuer - say, a European bank - to redeem the bond at its discretion in shares of a given blue chip by the maturity date. These bonds have high yields of around 15-20%. However the downside risk is identical to equities, because if the equity fall sin price, the bank will convert the bond to those equities, causing the investor losses equal to the equity losses.
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