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  1. #1

    High Yield Bonds Percentage

    How much high yield bonds should one hold in your portfolio? How much do you own?
    I've been looking guidance of how much should be in a portfolio, but can't seem to find any article that specifically addresses how much of this class of bonds one should own. I've also asked a similar question on another board, but didn't get a direct answer so I thought I'd try this forum.

  2. #2
    How much high yield bonds should one hold in your portfolio? How much do you own?
    I've been looking guidance of how much should be in a portfolio, but can't seem to find any article that specifically addresses how much of this class of bonds one should own. I've also asked a similar question on another board, but didn't get a direct answer so I thought I'd try this forum.
    Of course you didn't get an answer, it's too generic and tells us nothing about yourself, goals, how do you invest and what % in each category.
    This is my question to you and see if you can answer it..."what vehicle should I buy?"

  3. #3
    HY segment is a small slice [about 10%] of the total dollar-denominated bond universe.
    HY bonds have higher correlations with equities [40-60%].
    So, use them in moderation.
    Consider multisector bond funds that [can] combine sovereigns [US+foreign], HY and EM bonds

  4. #4
    Let me try to give a little objective direction. If you are a buy and hold investor, and you want high yield bonds in your portfolio, then you will want to target a % of your overall bond allocation to high yield bonds. There is no standard percentage amount, just like there is no standard international amount.
    Some of the things you will want to consider:
    Credit quality of the fund. VWEHX is at the highest end of junk, while others are much lower. This means more risk and more reward (expected).
    Duration and term of the fund. Short term is less risky than longer term and less reward expected.
    Equity action of high yield bonds. HY bonds tend to have rising correlations with equities during movements, particularly declines and particularly small value.
    So for a true buy and hold, "Nobody knows nothin'" investor, 10-20% of your chosen bond portfolio might be a good place to start.
    If one is very heavy on equities, then less or even no HY might be appropriate. Very conservative in equities, more HY might be appropriate.
    If you are not a buy and hold investor ( and there is nothing wrong with that), then there isn't much reason to worry about getting it exactly right; just pick a % and see how it goes.


 

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