Many of my clients hire me upon retirement or as they approach it. Low yields on high quality investment grade instruments have plagued us for years. They still do.
And now . . . I’m not sure we have the so-called “high yield” options either. Here’s why.
High Yield Declines
It’s just math.
As true as I believe this statement to be, sometimes the math doesn’t justify the risk. It’s time to look at the yields on your current bond holdings compared to their risk/quality rating.
“High yield bonds may be “high-yield” in name only now. Robust demand for corporate bonds pushed the average yield further into record-low territory, closing at 5.75% last week.” And taxable too.
“High-yield bonds still stand out in a low-yield world, but recent action suggests a closer look.” ~Andrew Valeri, CFA
Why the closer look?
With yield comes risk. Default rates have been low and many of these corporate bonds were deemed to be worth the risk for income investors. Due to the narrowing of the spreads between these bond yields and others, it’s time to look at the ones you own and assess the risk/reward potential. It’s a fun task and one I’ll happily do for you if you need me to.
If you are new to high-yield investing, keep in mind that these are also known as “junk bonds” and are rated BB or below. Typically, only suitable for sophisticated investors as part of a diversified portfolio.
To learn about alternatives to high-yield bond investments, contact me.
Until next week,
Susan R. Linkous
It will probably be the end of February before you receive your investment related tax documents.
The IRS has asked filers not to file in January. They need time to update forms and so do our accountants.
The opinions voiced above are mine and mine alone. They are not intended to be specific investment advice to any one person. Call for tailored help.