U.S. Investing

High-Yield Bond ETF Offers a Potential Safe Haven

The stock market is a challenging place for an investor’s money right now, and that trend has investors seeking alternative investments to continue to grow capital or find a safe haven.

Bonds are typically considered a safer asset class and are classically seen as a good investment in market downturns because they are less volatile than stocks and have the potential to go up when the market goes down. A relatively aggressive way to play bonds is by investing in higher-yield instruments through an exchange-traded fund (ETF) such as SPDR Bloomberg High Yield Bond ETF (JNK).

High-yield or “junk” bonds offer potential returns by way of yield. This fund invests in high-yield corporate bonds with higher liquidity.

Similar to most ETFs, JNK is a lower-cost method of playing a basket of assets. In this case, the fund invests in bonds of different companies.

Year to date, JNK has lost less value than the major stock indexes. It is down by about 10%, while the NASDAQ is down more than 23% and the S&P 500 has slid further than 13%.

This return does not include JNK’s yield, which currently sits at 6.19%. In general, the fund’s value comes more from yield than price increases. JNK has increased in value during the last month, however. Assets managed are just over $6 billion, while its expense ratio is a reasonable 0.40%.

Chart courtesy of www.StockCharts.com

The bond holdings of the fund cover a wide range of yields, blending to just over 6%-plus at present. A selection of the broad range of corporations whose bonds it holds includes TransDigm Group, Inc. (NYSE: TDG), Centene Corp. (NYSE: CNC), Caesars Entertainment Inc. (NASDAQ: CZR), Carnival Corp. (NYSE: CCL) and American Airlines Group Inc. (NASDAQ: AAL).

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For investors looking to find yield outside of the volatile stock market during current conditions, SPDR Bloomberg High Yield Bond ETF (JNK) provides one route to that goal.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.