Investment Help

If you are seeking investment help, look at the video here on my services. If you are seeking a different approach to managing your assets, you have landed at the right spot. I am a fee-only advisor registered in the State of Maryland, charge less than half the going rate for investment management, and seek to teach individuals how to manage their own assets using low-cost indexed exchange traded funds. Please call or email me if interested in further details. My website is at If you are new to investing, take a look at the "DIY Investor Newbie" posts here by typing "newbie" in the search box above to the left. These take you through the basics of what you need to know in getting started on doing your own investing.

Friday, June 25, 2010

How to buy high yield bonds

Investors today are fearful of the stock market. After the downturn in 2008 and the recent weakness, they are piling into bonds and this has worked well - up to now, despite the continued predictions of a bond market bubble.

Still there is a great need for yield, and one place investors are looking is high yield bonds. High yield bonds are bonds that are rated below investment grade. Here is a list of high yield bonds from the Wall Street journal- CLICK TO ENLARGE.

Notice there are a couple of bonds on the list that yield more than 10%. The reason they have such "attractive" yields is because they are very risky - they may not pay off. This is called default risk. If you buy individual high yield bonds, you need to be well diversified because you will experience some defaults.

The better way to go is with exchange traded funds (ETFs) that are diversified and managed by professionals who have the resources to do the necessary research. There are two popular high yield ETFs: JNK ( note: high yield bonds are also called junk bonds!) and HYG. Put "JNK" or "HYG" into Google, and you'll come up with a number of sources to do further research on these ETFs.

I recommend that, in total, no more than 10% of investable assets be invested in this particular sector. It makes a good diversification for the bond portion of your assets.

The yield on JNK is 12%.

Disclosure: Investors should consult a professional or do their own research prior to investing. The information here is intended for educational purposes only.

1 comment: