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High yields from corporates


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by Mary Anne and Pamela Aden, editor The Aden Forecast

Many of our readers have asked us about how to get higher yields. With rates so low and the economy rather uncertain, risk seems high almost everywhere. And for the past few years high yields have been a thing of the past.

Our dear friend and well respected analyst Steve Sjuggerud -- editor of Daily Wealth -- believes high yield (or junk) bonds are now at an ideal buying spot and he provides evidence to back this up.

We’ve known him a long time and value his views. He takes his work very seriously, so we wanted to pass this on…

High yield bonds are rated below BBB and they’re considered speculative. But there are times, usually when a recovery gets underway, when they’re a good investment and do well).

As Steve points out, junk bonds are currently yielding 8%. That’s a huge 6% more than Treasuries. This happened in 1991, 2002 and 2009 and each time, junk bonds surged.

Plus, the default rate is now only 1.5%, which is extremely low. In other words, risk is low and the upside looks good.

He likes the iShares High Yield Corporate Bond Fund (HYG) and we agree. It’s currently paying 7.26% interest.

This is an area we don’t normally venture into. But after checking it out, we feel this provides a good opportunity to collect a higher yield in the year ahead, using a portion of your bond portfolio. It’s especially attractive considering it’s one of the few high yield alternatives currently available.

Learn more about this financial newsletter at Mary Anne & Pamela Aden's The Aden Forecast.


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