High-yield bond funds are an interesting asset class and usually misunderstood by investors. Why? Because investors associate high-yield bonds with excessive high risk. And this is where the investment opportunities arise.
Example. Since January 2005, a typical high-yield mutual fund has broken even. Had you invested $100,000 in the S&P 500 you would have lost $20,000 as shown in the above chart (click on chart to enlarge).
Why the high-yield bonds perform so well? Two reasons. The first one is that the markets mis-price the risk premium. The second one is their high yield.
To find out more about my in depth view of the markets and my strategy just visit our website https://www.peterdag.com/ where you can review The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific money management needs. I will be happy to speak to your investment group on how the business cycle impacts investment strategies and the choice of asset classes. George Dagnino, PhD
Editor, since 1977
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