To minimize the risk associated with high-yield bonds (also known as junk bonds), investors might want to consider an exchange traded fund (ETF) with diversified holdings. High-yield bonds are considered especially risky because there’s a strong chance they could default. However, the positive side associated with these investments is that they have the potential for higher returns. One such high-yield bond ETF is the iBoxx $ High Yield Corporate Bond Fund (HYG).
HYG tracks the iBoxx $ Liquid High Yield Index, which is a corporate bond market index compiled by the International Index Company, according to Zoe Van Schyndel for The Motley Fool. This ETF launched in April and has 50 bonds that are fairly equally distributed with a weighting of about 2% each. This ETF has an expense ratio of 0.5% and is currently down 5.5% for the last three months. Again, because HYG is a riskier investment, investors need to ensure it matches their financial goals.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.