Bond Funds: High Yield
High yield bond funds take higher risks with the goal of paying higher yields by investing primarily in securities that are either not rated, or have been rated below investment grade by the major ratings agencies—for taxable funds, BB and below.
Reasons to consider high yield bond funds
- Invest in bonds that typically pay higher interest rates than similar bonds with higher ratings
- Can potentially help diversify a fixed income portfolio
Find high yield bond funds
Types of high yield bond funds
|Taxable high yield||
Invest primarily in taxable bonds issued by non-investment grade companies or governments.
Invest primarily in floating rate loans issued by non-investment grade companies. Loans are typically senior to bonds on the balance sheets of those issuers, and their coupons typically float above a common short-term benchmark, such as the London Interbank Offered Rate (LIBOR).
|High yield municipal||
Primarily invest at least 50% of their assets in municipal securities that are either not rated or that have been given a non-investment grade rating by a major agency such as Standard & Poor's or Moody's, which is considered speculative for municipal securities.