GPM has held high yield bonds (HYB) in balanced portfolios for most of the past 25 years. Long-term performance has benefited nicely. Despite volatility in 2015 and more pronounced weakness recently, the case for high yield as part of a diversified portfolio is strong.
“Concerns are heightened now because investors often move to sell money-losing fund positions and investments late in the year to generate losses that can offset their taxable income. The average junk bond fund is down 3% so far this year, after counting dividend income, according to Morningstar, but some are down more, making those holdings a logical choice for some investors to sell” – from the Wall Street Journal 12/15/15.
Well respected bond manager, Pimco makes a bullish case with which GPM agrees.
Valuations have improved and growth should keep defaults low outside of the energy and commodities sectors.
Additional insight from Blackrock; highlighting iShares iBoxx $ High Yield Corporate Bond ETF.
During times of market stress, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) has provided a source of trading liquidity, diversification, and transparent high yield bond exposure. It was no different during last week’s market volatility.