Through most of the year, high-yield bonds have enjoyed a good run as an attractive means for locking in strong income.
Even though the overall outlook for 2025 may seem murky, the environment still could support investing in junk bonds. Fundamentals for high yield continue to remain sound, and the credit category continues to offer resounding potential for higher income.
That being said, high-yield investing always comes with a degree of risk, even more so than traditional bond strategies. Due to their lower credit quality, junk bond bond investors always need to be vigilant over the risk of default.
This risk could become even more prevalent heading into the new year, given the bubbling uncertainty over the Fed’s rate cutting cycle. Many investors and experts remain confident that rate cuts will persist, but a change in federal leadership and economic policy makes the outlook unclear.
As such, investors who want to stay engaged with high-yield bonds should do so in a more risk-adverse manner. One easy means of doing so is accessing high-yield bonds through an actively managed ETF.
EVHY Offers an Active Solution
For example, take a look at the Eaton Vance High Yield ETF (EVHY). EVHY gives its investors solid access to the high yield bond space, while mitigating some of the potential risks.
Some may correctly guess that EVHY is an actively managed fund. This fund utilizes Eaton Vance’s extensive bond experience to deftly navigate the world of junk bonds.
With an actively managed strategy, EVHY can be better positioned to avoid some of the default risk that is normally present with high yield ETFs. Additionally, the active portfolio team can be more adaptive in responding to market moves or rate changes from the Fed.
As an additional perk, EVHY’s portfolio focuses on higher quality junk bonds, such as those with a BB- or B- rating. These bonds may be at less of a risk of default than the CCC- rated bonds an investor would typically expect.
Even with its risk-adverse strategy, EVHY is offering resoundingly strong yields for its investors. As of October 31, 2024, EVHY has a distribution yield of 7.04%.
For more news, information, and analysis visit The ETF Yield Channel.