A high-yield bond fund is a type of bond fund that invests 60% or more of its net asset value in non-investment grade high-yield bonds (commonly referred to as "junk bonds"), while the term "high-yield bond" means a bond that has been assigned a rating below BBB-/Baa3, or has not been rated at all. Risk of default is relatively high, which is why high-yield bond funds are not suitable investments for investors that are unable to assume the associated risk. Investors that invest in high-yield bond funds are advised to carefully evaluate their own risk tolerance.

Because high-yield bond funds are riskier than other bond funds, the FSC has adopted a rule requiring that the name of a high-yield bond fund must be suffixed with the following warning (printed in boldface, in an eye-catching color, and with the entire text in the same font size): "This fund invests primarily in non-investment grade high-risk bonds." A risk warning must also be disclosed in prominent lettering on the prospectus and in all advertising. In addition, an investor that is not a qualified institutional investor must sign a risk disclosure statement before subscribing. Signature of this statement confirms the investor's understanding that the risks of a high-yield fund include, without limitation, the following:

1.  Credit risk: Because a high-yield bond is rated at below investment grade, or is unrated, the issuer could default on principal or interest, or go bankrupt.
2.  Interest rate risk: Bond prices are easily affected by interest rate movements. A sharp interest rate spike could cause a bond's price to plummet. This same risk also applies to high-yield bonds.
3.  Liquidity risk: A high-yield bond can lose liquidity due to low-volume trading in the market, which means that an investor faces the risk of being unable to sell the bond quickly at a reasonable price.