Corporate bonds pay higher yields than government bonds to compensate for higher default risk. Investment-grade bonds (rated BBB– and above) are considered relatively safe; high-yield ('junk') bonds pay much more but can default.
Diversified corporate bond funds and ETFs reduce single-issuer risk and are the most common way retail investors access this asset class.
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Open Decision Lab →Frequently asked questions
Are corporate bonds safer than stocks?
Investment-grade bonds typically are, especially over shorter horizons. High-yield bonds behave more like stocks in stressed markets.