Personal Finance: High-yield bonds may be past due

09.20.09

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Investors have done well in stocks this year, but the stock market has been chintzy compared with high-yield bonds.

As investors have recovered their nerve, the riskiest of bonds have soared. The Merrill Lynch High Yield Bond Index has provided “an incredible total return of 41.4 percent,” according to Moody’s economist John Lonski, while the Standard & Poor’s 500 has climbed barely a third of that.

Despite some of the harshest conditions for corporations since the Great Depression, the flood of money into the financial system has made investors willing to bet that even weak companies will be able to make their bond payments.

But with economic conditions still fragile, advisers suggest investors review their exposure to high-yield bonds and cut back if they have ballooned into a larger portion of portfolios than intended.

“High-yield has come a long way,” Lonski said. There is still room for investors to make more money if the economy continues to improve in 2010, but “investors are making a mistake if they think there will be another 40 percent return anytime soon.”

Defaults are the key

Steve Leuthold, a money manager at the Leuthold Group, of Minneapolis, said he believed annual returns of 6 percent to 8 percent were likely over the next few …

Read the original article at Philly

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One Response to “Personal Finance: High-yield bonds may be past due”

Aimee Epps Says:
December 9th, 2009 at 4:40 pm

Motivating stuff, did you know though that the average American has anywhere between 5 and 10 credit cards. There are individuals who have up to 50 diverse credit card accounts open, though. That doesn