One - year returns
of junk bond funds averaged 20 % in 2003 after a two - year slump, tracking the stock market rebound.
VWEHX is among the safest
of the junk bond funds.
Other factors also impact portfolio performance; most notably, the specific market segments in which it is invested — durations
of junk bond funds will exceed durations of treasury funds with similar maturities.
That's left a lot
of junk bond fund managers with plenty of exposure to the energy sector at a time when oil prices have crashed and defaults, particularly among fracking companies, are rising.
The main danger
of a junk bond fund is that there will be a higher rate of bankruptcy / default than in an investment grade bond fund.
«junk bond king» wrote a thesis that two percentage points were enough compensation for the likely higher default rate
of a junk bond fund over a corporate bond fund.
Just look up the performance
of any junk bond fund in the past couple of months.
Not exact matches
Four
of the top 10
funds in terms
of inflows from Oct. 7 - 13 came from the
bond sector, and two
of them were focused on high - yield, or
junk.
One reason for looking at
junk bonds is that the firms that issue
junk bonds are closer on the risk continuum to a large mass
of firms that are too small and too weak to issue
bonds at all, and that rely on banks or the informal capital market for
funds.
Pension
fund managers played a large role in the
junk bonding of industry in the 1980s.
The
fund can purchase securities
of any credit quality, including those in default, but it will primarily invest in investment - grade debt, with no more than 20 %
of the portfolio invested in
junk bonds.
Greylock, a $ 990 million hedge
fund run by Willem J. «Hans» Humes, says in a filing with the Securities and Exchange Commission that international
junk bonds are «generally considered to be predominantly speculative with respect to the issuer's capacity to pay,» and that defaulters sometimes end up shielded by «principles
of sovereign immunity.»
The next big event that triggers a big sell - off in the
junk market will cut the value
of a lot
of these
junk bond mutual
funds down by one - third to a half.
Junk bond funds are largely out
of favor this year, but an interest - rate - hedged high - yield
bond ETF is beating that trend.
A partial but not complete list
of worries includes: China melt down, Yuan reevaluation after effects or Taiwan action, global biomedical epidemics, e.g. Avian Flu, or bioterrorism outbreaks, trade wars (China, EU), major hedge
fund bankruptcies, a PBGC (Pension Benefit Guaranty Corp.) shortfall crisis, major
junk bond or emerging market
bond default, a bank derivative blowup, Fannie Mae issues plus possible assorted natural disasters.
Meanwhile, Bloomberg reports that pension
funds, squeezed for sources
of safe return, have been abandoning their investment grade policies to invest in higher yielding
junk bonds.
He lost money because a lot
of other
funds have made money gambling on corporate
junk bonds that are yielding about 6.5 % now.
Both Fulton and Fishkill have near
junk bond status, the board members said, as well as a low «
fund balance»
of cash to help them bridge potential budget gaps.
There are also
funds that invest in a specific type
of security, such as
junk bonds or preferred stocks.
As time passed, the number
of funds increased as they began to specialize in certain types
of investments: foreign - country
bonds, high - tech stocks, high - yield (
junk)
bonds, and so forth.
The Sub-Advisor seeks to achieve the
fund's investment objective by selecting a focused portfolio
of high - yield debt securities (commonly referred to as
junk bonds).
Although the advisor intends to invest at least 65 %
of the
fund's net assets in municipal
bonds rated investment grade or in unrated municipal
bonds that
fund management believes are
of comparable quality, it is possible that in the future the
fund could invest up to 100 %
of its assets in «
junk bonds.»
With the advent
of the 1980s we had two innovations:
junk bonds and
bond index
funds.
The
fund may invest in foreign securities,
junk bonds, ETFs, REITs, futures and options and other types
of derivatives.
The BMO Monthly Income ETF (ZMI) is a portfolio
of 10 other high - yield exchange - traded
funds, covering real estate investment trusts (REITs), corporate
bonds (both investment grade and
junk), emerging market
bonds, and dividend - paying stocks.
A
fund with this exposure can certainly lose money during a 2008 - type crisis because
of liquidity concerns, but it won't suffer anything like the carnage we saw with
junk bonds.
To a lesser extent, it has also gone into high - yield mutual
funds that buy
bonds rated below investment grade, known as
junk bonds to those who are dubious
of them.»
But I'd be wary
of venturing, as some investors seeking higher yields do, into high - yield, or
junk,
bond funds, as they're generally more volatile than investment - grade
funds and don't hold up as well in periods
of economic and market stress.
Several
of the
funds listed are speculative (
junk)
bond funds.]
I'm a big fan
of junk bonds, but I'd probably get a little friskier and buy a levered
junk bond closed end
fund.
3 - month
fund flows is a metric that can be used to gauge the perceived popularity amongst investors
of Target Maturity Date
Junk Bonds relative to other b
Bonds relative to other
bondsbonds.
Target Maturity Date
Junk Bonds and all other type of bonds are ranked based on their aggregate 3 - month fund flows for all U.S. - listed ETFs that are classified by ETFdb.com as being mostly exposed to those respective b
Bonds and all other type
of bonds are ranked based on their aggregate 3 - month fund flows for all U.S. - listed ETFs that are classified by ETFdb.com as being mostly exposed to those respective b
bonds are ranked based on their aggregate 3 - month
fund flows for all U.S. - listed ETFs that are classified by ETFdb.com as being mostly exposed to those respective
bondsbonds.
U.S. Municipal
Bonds: (Data as
of May 16,2013) Corporate
junk bond yields have risen as mutual
funds have seen outflows.
I invest that middle - term money in a mix
of junk high yield
bond funds and «high» yield savings accounts at an online bank.
Guggenheim Investments currently offers 14
of these
funds, 8
of which invest in investment grade
bonds, 6
of which invest in high yield or «
junk»
bonds.
The
fund may invest up to 100 %
of its managed assets in below - investment grade debt securities (commonly referred to as «high - yield» or «
junk»
bonds).
The Vanguard High - Yield (aka
Junk)
Bond mutual
fund yields about 6.5 % (relatively high yield and perceived likelihood
of defaults).
It may not be appropriate, therefore, to compare the performance
of a high - yield (or «
junk»)
bond fund with these averages.
It may not be appropriate to compare the performance
of a high - yield (or «
junk»)
bond fund with this average.
The
Fund's investments in high - yield securities or «
junk bonds» are subject to a greater risk
of loss
of income and principal than higher grade debt securities.
Even as
junk bond yields fell into the 6 % range, investor demand for bonds held up well, and the SPDR Barclays High Yield Bond ETF (NYSEMKT: JNK) and iShares iBoxx HY Corporate Bond ETF (NYSEMKT: HYG) were among the best - performing funds with returns of around 11 % to 1
bond yields fell into the 6 % range, investor demand for
bonds held up well, and the SPDR Barclays High Yield
Bond ETF (NYSEMKT: JNK) and iShares iBoxx HY Corporate Bond ETF (NYSEMKT: HYG) were among the best - performing funds with returns of around 11 % to 1
Bond ETF (NYSEMKT: JNK) and iShares iBoxx HY Corporate
Bond ETF (NYSEMKT: HYG) were among the best - performing funds with returns of around 11 % to 1
Bond ETF (NYSEMKT: HYG) were among the best - performing
funds with returns
of around 11 % to 12 %.
Over the past 15 years, the average
junk bond fund has returned an annualized 6.9 % in interest and principal gains, compared with 3.9 % for an index
of high - quality U.S.
bonds.
Putnam Income
Fund Investment Option invests in Putnam Income
Fund, which invests mainly in securitized debt instruments (such as mortgage - backed investments) and other obligations
of companies and governments worldwide denominated in U.S. dollars, are either investment - grade or below investment - grade (sometimes referred to as «
junk bonds») and have intermediate to long maturities (three years or longer).
Like HYG, the SPDR Bloomberg Barclays High Yield
Bond ETF is an index
fund connected to
junk bonds — those same
bonds that are prone to bankruptcies and caused tremendous havoc during the oil crash
of 2014.
Bonds (both investment grade, and
junk), money - market
funds and real - estate (both as the investor's home, and in the form
of Real Estate Investment Trusts) are discussed as asset classes in which investors should participate.
Because managers Dan Fuss and Kathleen Gaffney typically own a large helping
of high - yield, or
junk,
bonds (those rated double - B or lower), as well as
bonds from developing nations, the
fund took a hit when investors bailed out
of anything smacking
of risk during the financial crisis and rushed into Treasuries.
In November
of 2008 through March
of 2009, it made a lot
of sense to buy
junk bonds, and I did so for my church building
fund.
Since this
fund is composes
of higher quality issues, the risk
of default is modest compared to
junk bonds, but
of course, we only consider US government debt as the sole risk - free
bond issuer.
Despite the negative connotation
of the term «
junk bond,» these
bonds are widely held by investors, especially in mutual
funds and exchange - traded
funds (ETFs), which mitigate the default risk for any individual
bond.
However, a
junk bond can be a useful diversification tool if you are intimately familiar with the company and its operations, and investing a small part
of your portfolio in a high - yield
bond fund might be a good strategy.