At a time when investors hunger for yield, junk bonds look appealing. But if the economy tanks, more high-yield bonds could be downgraded and more issuers could default. If so, declines in the value of the bonds will more than offset those generous yields. In fact, the average junk bond fund has lost money in 2011.
But junk-bond funds are not all alike. Some are way more selective than others and seek to cut risk without sacrificing much, if any, income. One fund that fits that description is CNI Charter High Yield Bond. CNI focuses on senior secured bonds, which have high priority for repayment and are backed by collateral. The fund keeps maturities short—four to seven years, mostly—which dampens volatility in bond prices. Over the past ten years, the fund returned 7.6% annualized, compared with 8.5% for the Bank of America/Merrill Lynch High Yield Total Return Index.
Manager Richard Lindquist, co-managers Patrick Mitchell and Steve Sautel, and an army of 40 researchers and 15 lawyers do serious credit analysis. They look for midsize companies in industries, such as software, that don’t require much cash for daily operations but generate high free cash flow (the cash profit left after the capital outlays needed to maintain the business). And with 233 bonds, no issue represents much more than 1% of the fund’s assets.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
-
Stock Market Today: Have We Seen the Bottom for Stocks?Solid first-quarter earnings suggest fundamentals remain solid, and recent price action is encouraging too.
-
Is the GOP Secretly Planning to Raise Taxes on the Rich?Tax Reform As high-stakes tax reform talks resume on Capitol Hill, questions are swirling about what Republicans and President Trump will do.
-
Best Banks for High-Net-Worth Clientswealth management These banks welcome customers who keep high balances in deposit and investment accounts, showering them with fee breaks and access to financial-planning services.
-
Stock Market Holidays in 2025: NYSE, NASDAQ and Wall Street HolidaysMarkets When are the stock market holidays? Here, we look at which days the NYSE, Nasdaq and bond markets are off in 2025.
-
Stock Market Trading Hours: What Time Is the Stock Market Open Today?Markets When does the market open? While the stock market does have regular hours, trading doesn't necessarily stop when the major exchanges close.
-
Bogleheads Stay the CourseBears and market volatility don’t scare these die-hard Vanguard investors.
-
The Current I-Bond Rate Until May Is Mildly Attractive. Here's Why.Investing for Income The current I-bond rate is active until November 2024 and presents an attractive value, if not as attractive as in the recent past.
-
What Are I-Bonds? Inflation Made Them Popular. What Now?savings bonds Inflation has made Series I savings bonds, known as I-bonds, enormously popular with risk-averse investors. So how do they work?
-
This New Sustainable ETF’s Pitch? Give Back Profits.investing Newday’s ETF partners with UNICEF and other groups.
-
As the Market Falls, New Retirees Need a Planretirement If you’re in the early stages of your retirement, you’re likely in a rough spot watching your portfolio shrink. We have some strategies to make the best of things.
