Advertisement
investing

A Juiced-Up Junk Bond Fund

Northeast Investors Trust’s father-son team adds stocks and, sometimes, leverage to the mix.

For all the hand-wringing over the bond market’s 2013 performance, it has hardly been catastrophic. The most closely watched bond benchmark is down 2% so far this year, but some segments have delivered decent results. Take junk bonds. Through October 4, the Merrill Lynch High Yield Master II index returned 4.2%, and the average junk bond mutual fund gained 4.1%. Junk bonds held up reasonably well this year because their high yields insulate them somewhat from the perils of rising interest rates.

One of the top-performing junk funds over the past year, Northeast Investors Trust (symbol NTHEX), is one of the oldest (it opened in 1950) and one of the most aggressive. The fund can invest up to 20% of its assets in stocks, and it can employ leverage—that is, use borrowed money to attempt to boost returns. The fund went to a 20% leveraged position last June after big selloffs in the stock and bond markets, says co-manager Bruce Monrad. As of early October, he says, the fund is no longer leveraged, though it does have 12% of its assets in stocks.

Advertisement - Article continues below

Monrad runs Northeast with his father, Edward, who has been with the fund since 1960. The pair, who call themselves value investors in the junk bond space, look for companies with solid cash flow. They also prefer bonds with relatively short maturities—three to seven years—which softens volatility. “High yield may be more stable than you think,” says the younger Monrad.

Small Company Value Funds graphic
K12I-FUNDTRENDS_RANKINGS.1.indd
Advertisement
Advertisement

Most Popular

What Trump's Payroll Tax Cut Will Mean for You
Tax Breaks

What Trump's Payroll Tax Cut Will Mean for You

President Trump issued an executive order to suspend the collection of Social Security payroll taxes. How much will it save you?
August 10, 2020
What a Payroll Tax Cut Would Mean for You
Tax Breaks

What a Payroll Tax Cut Would Mean for You

If Congress can't pass another stimulus bill, President Trump says he will initiate a payroll tax cut by executive order. How much would that save you…
August 8, 2020
Drawing Down Retirement Savings in a Pandemic
Coronavirus and Your Money

Drawing Down Retirement Savings in a Pandemic

Tapping the right accounts at the right time matters. Knowing how much a retiree can spend each year without running out of savings in old age is even…
August 7, 2020

Recommended

Bonds: 10 Things You Need to Know
Investing for Income

Bonds: 10 Things You Need to Know

Bonds can be more complex than stocks, but it's not hard to become a knowledgeable fixed-income investor.
July 22, 2020
The 7 Best Funds for Beginners
mutual funds

The 7 Best Funds for Beginners

New investors have it better than ever. The best mutual funds and ETFs for beginners feature no minimum investments, dirt-cheap fees and broad market …
July 30, 2020
Kip ETF 20: The Best Cheap ETFs
ETFs

Kip ETF 20: The Best Cheap ETFs

You can build a solid core for your portfolio and explore new opportunities with our favorite low-cost exchange-traded funds.
July 28, 2020
Metropolitan West Corporate Bond Has a Bright Future
Making Your Money Last

Metropolitan West Corporate Bond Has a Bright Future

This new-ish corporate bond fund is comanaged by familiar faces.
July 23, 2020