A Unique Strategy to Prosper From Junk Bonds

Market Vectors Fallen Angel High Yield Bond ETF has topped most junk funds by owning bonds that were once high-grade.

Junk bonds appeal to investors who are willing to accept more risk in exchange for superior yields. But a subset of the high-yield universe—bonds that were issued with investment-grade ratings but have since descended to junk status—has delivered blissful results of late. Over the past five years, an index of these “fallen angel” bonds has returned an annualized 10.6%, crushing the broad U.S. bond market by an average of 6.5 percentage points per year and traditional junk bonds by 3.6 points per year.

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Kaitlin Pitsker
Associate Editor, Kiplinger's Personal Finance
Pitsker joined Kiplinger in the summer of 2012. Previously, she interned at the Post-Standard newspaper in Syracuse, N.Y., and with Chronogram magazine in Kingston, N.Y. She holds a BS in magazine journalism from Syracuse University's S.I. Newhouse School of Public Communications.