Be careful how you buy your bonds. The most popular tickers have a few “fatal flaws” that’ll doom you to underperformance at best, or leave you hanging in the event of a market meltdown at worst!
Let’s pick on the widely followed and owned iShares iBoxx High Yield Corporate Bond ETF (HYG) as an example. It has attracted $15 billion in assets because:
- It’s convenient – as easy to buy as a stock.
- It’s diversified (for better or worse, as we’ll see shortly) with 981 individual holdings.
- It pays–5.6% today, to be specific.
The accessibility of funds like HYG appears cute and comfortable enough.… Read more