Gain High-Yield Corporate Bond Exposure with This Fund

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The SPDR Bloomberg Barclays High Yield Bond ETF (JNK) tracks a market-weighted index of highly liquid, high-yield, U.S. dollar-denominated corporate bonds.

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JNK seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Bloomberg Barclays High Yield Very Liquid Index. It is a cost-efficient way to implement a high-yield exposure, compared to individual bonds.

The exchange-traded fund (ETF), which rebalances its holdings on the last day of each month, is a hugely popular, liquid high-yield corporate bond fund. The ETF’s portfolio is one of the broadest in the segment. It charges a reasonable fee, but its tracking has been a bit sloppy at times, so investors may find the holding costs more than advertised.

The fund trades well, however, so it offers liquidity and has a huge asset base. JNK competes most directly with HYG, an iShares ETF by BlackRock that I featured in last week’s ETF Talk, which also is extremely large and liquid.

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Heavily weighted in the United States (81.77%), the fund also is invested in Canada (4.88%) and the United Kingdom (3.17%). Its main two sectors are Industrial (74.08%) and Financial (21.64%). JNK’s overall portfolio composition consists of 98.76% bonds.


Courtesy of StockCharts.com

The fund has more than $10 billion in assets under management, 895 holdings and an average spread of 0.01%. With an expense ratio of 0.40%, it is relatively inexpensive to hold in relation to other exchange-traded funds. It is listed on the NYSE Arca Exchange and has been around since November 28, 2007.

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With a 5.55% yield, a monthly dividend distribution policy and a dividend increase of almost 5% year to date, JNK could be a good equity for investors looking to gain high-yield exposure in the bond market.

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However, as always, all interested investors are urged to conduct their own due diligence before deciding whether this fund suits their individual portfolios.

Rest assured, I remain as happy as ever to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk and you’ll know where it originated.

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