Its still to early but if the yields get above 8.0% in some of the better mutual funds is anyone going to bite? Vanguard has a high yield fund that is a lot more conservative than others and its at 6.43%. Thinking about adding a little piece of about $3,000.00 if it continues to climb.
No, but I'm bearish everything
I won't invest in high yield until we see how the bond market reacts to the energy market defaults that will probably happen in the near future.
Help to educate me on these high yield bond funds. Are these junk bonds? How can they pay out such a high yield?
They are junk bonds. Some of the mutual funds are more conservative so they are less "junky" and may have a smaller exposure to energy. I think the model they use is to by a lot of "lesser quality" bonds, knowing that some of the them will default, but with the yield and the number of bonds it still is able to pay out a higher than average yield without dinging the NAV too bad. Its still too early for me to buy but I think at some point if the yield goes up high enough due to the NAV falling it may be worth a look. I wouldn't be putting a big amount in, maybe 2% of a portfolio.Originally Posted by Bassin08
Might not be the smartest, but right now I have all of my wife's 401k in AHITX (high yield bond) paying a 6.92% yield.
Credit quality is B and 85% of the fund is in corporate bonds.
Everything else I had her in is down 2-4 dollars each, so pretty content with that decision for now.
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