Bond holders have had to endure much less turbulence this year compared to stock holders, and the junk bonds have yielded the best compensation for their high 9.2% volatility rate.
The numbers illustrate the case for bonds, as the S&P 500 returned only 7.7% annually over the 20 years through June 17. That was a full percentage point behind the 8.7% for Treasuries with maturities of 10 years or more, only slightly ahead of junk bonds’ 7.5% returns and investment-grade bonds’ 7.2%, according to Morningstar.
Bonds are an alternative for trying to ride the market momentum up. Economic fundamentals are supporting the case for bonds for the long term, rather than taking on high risk with the equities markets.
For more stories on corporate bonds, visit our bond category.
For full disclosure, Tom Lydon’s clients own shares of LQD.