High yield "junk bond" Canadian/US ETFs?

[DeathByRadio]

Hello everyone,

Been reading a lot about investors turning to these in the wake of poor yields and returns in the rest of the market. Looking to secure some capital over short term with some decent monthly income while I wait to invest in another rental property.

And 2 whopping points at ING ain't cutting it know what I'm sayin' lol.

Thoughts? Ideas? Complaints? Thanks!

[Belguy]

I have a small percentage of my overall portfolio in JNK for diversification purposes.

https://www.spdrs.com/product/fund.seam?ticker=JNK

[Argonaut]

How does JNK work in a non-reg account for Canadians, or do most people own it in RRSP?

[Belguy]

I'm not sure how it works in a non-registered account. Mine is in my RRSP account.

[Jungle]

It might be considered interest income.. best to hold in sheltered account.

BTW junk bond etfs nav tend to move with equity, so there is still a risk to lose money if markets crash again.

[Sampson]

Which asset classes does JNK move independently of? I always thought there was high correlation with equities so was never tempted by the high yields. Might as well take the equity risk.

[andrewf]

High yield offers more diversification benefit than holding international stocks. Yes, HY is correlated to equities, but the correlation is not perfect. HY has way outperformed stocks over the past 5 years. ~27% to 2% total returns for JNK and SPY over the past 4 years (since JNK inception), per bloomberg.

HY is a very good candidate for a registered account due to the high coupon rates.

[Sampson]

I can buy your argument, but as you point out, you are likely using HY instead of international equities, not to replace 'traditional' domestic bonds.

[andrewf]

HY is certainly more volatile/risky than investment grade debt, and not an appropriate substitute. I do think HY offers a good risk/reward proposition, though.