What Are the Best Corporate High-Yield Funds?
High-yield bonds return more than other bonds, but you can lose your money in times of recession when shakier companies start to default on their loans.
iShares iBoxx $ High Yield Corporate Bond Fund (HYG)
Contact: 800-474-2737; iShares
Type of fund: Exchange-traded fund
Types of bonds: Corporate high yield
Average maturity: 6 years
Expense ratio: 0.50 percent
Minimum investment: None
This fund opened in April 2007. Its first full year in operation, 2008 (a bad year for corporate high-yield bonds), the fund lost 17.19 percent. The next year, it came back with a return of positive 28.74. This is obviously not your typical sedate bond fund.
Vanguard High-Yield Corporate Fund (VWEXH)
Contact: 800-662-7447; Vanguard
Type of fund: Actively run mutual fund
Types of bonds: Junk bonds, but not enormously junky
Average maturity: 4.9 years
Expense ratio: 0.23 percent
Minimum investment: $3,000
This is a long-time leader in junk bond investing. Since its inception in late 1978, this fund has returned 8.7 percent, but not without some bumps in the road. In 2008, shareholders lost 21.3 percent. If you have $50,000 to invest in this fund, choose the Admiral Shares version (ticker VWEAX), which carries an expense ratio of only 0.13 percent.