Chapter 7. High-Yield Bond Funds—Earn the Best Yields Available while Managing the Risks
Wouldn’t it be great to get 8% per year or more in interest income from a bond mutual fund? This is not idle fantasy at a time when the average investment-grade bond is paying just 4%. You can get very juicy yields if you are willing to bear the credit risk of high-yield bonds, or junk bonds, which represent roughly the bottom sixth of the bond market in terms of creditworthiness. Of course, bond funds that pay 8% in a 4% world are risky, and they are not good investments all the time. In this chapter, you learn how to recognize propitious times to reach for the yield of high-yield bond mutual funds, and when to stay away.