Junk bonds refer to an investment that is usually rated below the investment grade at the time it is being sold in the market. For the fact that they are given a lower value, they also have the potential for very high yields as a way of attracting investors. Unfortunately they also have a very high risk of default or credit adversities, but this should not be a put-off to investors because, they have proved to be very reliable over the years.

Junk bonds are also commonly known as non-investment grade bond or speculative grade bond. They are seen to have the same characteristics as a regular bond. At the time of issue, the issuing company or organization must state the amount of money they intend to pay you back as you redeem the investment. They also have to be specific about the date of repayment. You will find that the maturity period differs depending on the issuing company.

These investments fall into a number of categories depending on various other factors. The Investment Grade category is that which is issued by low-medium risk lenders. They do not have very attractive returns but their risk factor is also as low. The Junk Bonds are also a category on their own and are labeled as BB/Ba or less.

Fallen angels has been rated under this investment, but this happened because its performance declined and its prices became unfavorable. As such, they have always been given figures less than what they are really worth and hence have the potential for greater returns. Rising Star is a category that has characteristics of an investment that will soon be soaring high in prices and worth as well.