10 High-Yield Funds to Avoid

We've all heard that the Federal Reserve is considering a December hike in interest rates, which would be the third bump in 2017.

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We've all heard that the Federal Reserve is considering a December hike in interest rates, which would be the third bump in 2017. If and when it does increase rates, the new target would be a mere 1.5%. For many investors, bonds yielding that much simply don't provide enough income, especially when inflation is tracking around 2%.

The extremely low-interest-rate environment has meant CDs aren't worth the time, and old-fashioned Treasury bonds aren't much help in getting investors any closer to a comfortable retirement. Meanwhile, sky-high prices for many dividend stocks have caused their yields to fall, too – leading investors to look at more exotic alternatives, such as high-yield funds, to get more cash flow from their nest egg.

There's just one problem: Many of these funds are unstable, with several slashing their payouts regularly and seeing big price drops as a result. While some funds are great, many are "yield traps" that lure investors in with the siren song of an appealing headline dividend yield, but disappoint after the "buy" button has been pressed.

Here are 10 high-yield funds that have gotten a lot more popular – and dangerous – in recent years.

Data is as of Oct. 13, 2017. Click on symbol links in each slide for current share prices and more. Yields represent the trailing 12-month yield, which is a standard measure for equity funds.

Michael Foster
Contributing Writer, Kiplinger.com
Michael Foster is the Lead Research Analyst for Contrarian Outlook, where he writes CEF Insider. He has written on high-income assets, dividends, closed-end funds and exchange-traded funds for a number of publications including Forbes, Bankrate and SeekingAlpha. Michael finished his PhD in 2008 and has been advising investors since 2011.