Experience and diversification really matter. In researching a fund, pay extra attention to how long the portfolio manager has been there. Given the volatility of high-yield funds, you want a management team that has been tested by a variety of market conditions over the last five to 10 years and come through it with solid results.
Spreading your money out among different types of corporate junk also is extra important because of the risk that defaults in one weak sector could cost you heavily.
Junk bond funds vary dramatically in credit quality. Check the credit quality before you decide on your preferred level of risk.
"High-yield portfolios can vary in quality from 'a little junky' to 'stinky,'" says Dina Lee, a personal financial specialist with the American Institute of Certified Public Accountants.
A good way to invest in junk bonds is through a low-cost exchange-traded fund such as the iShares iBoxx $ High-Yield Corporate Bond Fund (HYG).
Alternatively, five high-yield funds recommended by Chicago-based Zacks Investment Research are Transamerica Partners High Yield Bond Fund (DVHYX), Federated High-Income Bond Fund (FHIIX), USAA High-Yield Opportunities Fund (USHYX), Catalyst/SMH High Income Fund (HIIFX) and John Hancock High Yield Fund (JIHDX).
Just don't load up your portfolio with junk. Indulge with moderation, as with emerging-market stocks or with wine.
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