Be careful how you buy your bonds. The most popular tickers have four “fatal flaws” that’ll doom you to underperformance at best, or at worst leave you hanging in the event of a market meltdown!
Let’s pick on the widely followed and owned iShares iBoxx High Yield Corporate Bond ETF (HYG) as an example. It has attracted nearly $17 billion in assets because:
- It’s convenient and as easy to buy as a stock.
- It’s diversified (for better or worse, as we’ll see shortly) with 1,188 individual holdings.
- It pays well, at 6% today.
The accessibility of funds like HYG appears cute and comfortable enough.… Read more
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