What type of investment strategy is typically associated with smaller companies and higher yield bonds?

The investment strategy typically associated with smaller companies and higher yield bonds is speculative. This approach involves taking on a higher level of risk in anticipation of greater returns. Smaller companies often have the potential for substantial growth, but they may also come with increased volatility and uncertainty, making them more suitable for investors who are willing to accept the risks for the chance of higher rewards.

Higher yield bonds, often referred to as high-yield or junk bonds, are issued by companies or entities with lower credit ratings. These bonds offer higher interest rates to entice investors, compensating them for the increased risk of default. Investors who pursue a speculative strategy are generally looking to capture the upside potential of these higher-risk investments, fully aware that they may face significant price fluctuations.

In contrast, other investment strategies like conservative investing tend to focus on lower-risk assets aimed at preserving capital and generating stable returns. Balanced strategies seek to allocate investments across multiple asset classes for diversification. Value investing concentrates on identifying undervalued stocks, typically focusing on companies with stable earnings and strong fundamentals, rather than smaller, higher-risk entities. Thus, the correct identification of speculative as the strategy aligns well with the characteristics of both smaller companies and higher yield bonds.