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High-Yield Bonds Work for a Flip or a Hold

By Brian Gilmartin

 About this article:
 It is no revelation that corporate high-yield bonds (as an asset class) had a tough 2008 -- the defaults of both Bear Stearns and Lehman Brothers sent investors and lenders fleeing from riskier corporate credits; corporate high-yield mutual funds and ETFs saw declines in 2008 of between 30% and 40%, comparable to equity market losses. Whether for a quick trade or for a longer time horizon, I believe corporate high yield is a place to allocate some money presently, and it deserves a spot in a diversified investment portfolio. With our clients, we avoided the corporate high-yield bond market completely after 2005, selling our junk bond funds as credit spreads returned to historical norms following the dramatic widening in 2001 and 2002, but we returned too soon to the market in 2008, allocating money back into corporate high yield after the Bear Stearns default. Two vehicles...

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