# High Yield Bond Funds



## Belguy (May 24, 2010)

I currently hold the following bond investments:

iShares Corporate Bond Index ETF
iShares Real Return Bond ETF
iShares IBoxx High Yield Corporate Bond ETF
iShares U.S. Corporate Bond ETF
Morgan Stanley Emerging Markets Domestic Debt Fund
SPDR Series Trust Barclay's High Yield Bond Fund
PH&N Bond Fund D

High Yield bonds have had a good run over the past few months and the tide seems to be turning at least in the past few weeks.

My dilemna is whether to continue to hold the above fixed income portfolio or whether to sell the HY funds, and possibly the Corporate funds as well and, for simplicity's sake, put everything into the PH&N Bond Fund D and let the professional managers there look after things in a rising interest rate environment.

Any thoughts? How are you investing your fixed income allocation as interest rates start to rise?


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## Mr_DIY (Feb 3, 2010)

My head would start spinning if I owned that many bond funds : ) Simplifying should definitely be a priority.


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## mogul777 (Jun 2, 2009)

Why the heck would anyone need 7! bond funds? And why would you keep the one with the highest MER? Rule #1 buy the bond fund with the lowest fees. 

High yield and corporate means the same thing so you may actually want to learn about bonds before you decide what to do this time.  
The interest rate just went up so you've got a window of time to ponder this... and to discover that bond prices are not mainly driven by interest rate movements. 

Good luck.

BTW, all my personal account bond holdings are in high yield bonds.


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## Cal (Jun 17, 2009)

Why not just 1 bond fund? Each fund really does offer alot of diversification.

How many funds do you own in total?


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## Belguy (May 24, 2010)

I currently have 19 mainly etf's in my portfolio while I recommend to others that they have just four or five broad-based etf's.

Am I in the danger range for 'diworsification'?

In the equity portion, I have ETF's for the following categories:

Canadian Value
Canadian Smallcap
Canadian Energy
Canadian Materials
Canadian REIT's
U.S. Largecap
U.S. Smallcap
U.S. Dividend Income
Nasdaq
Europe/Pacific
BRIC
Latin America
Emerging Markets
Global Precious Metals

Plus the bond funds listed above.

Any advice on where to start pruning? Where have I gone wrong?

I started out with just four investments: XBB, XIU, XIN, and XBB and it gradually evolved into the lengthier list that I have now.


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## mogul777 (Jun 2, 2009)

Belguy said:


> I currently have 19 mainly etf's in my portfolio while I recommend to others that they have just four or five broad-based etf's.
> 
> Any advice on where to start pruning? Where have I gone wrong?
> 
> I started out with just four investments: XBB, XIU, XIN, and XBB and it gradually evolved into the lengthier list that I have now.


Why is your advice not applicable to yourself? I think you can answer your own question. If you need a huge hint a simple get back to basics will be it.


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## Cal (Jun 17, 2009)

Yeah...that is alot...you could reduce all of your CDN etfs by simply holding an index fund...that is basically what you have now.

I agree with your own advice of 4-5 broad based funds/etfs.


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## Sampson (Apr 3, 2009)

Cal said:


> Yeah...that is alot...you could reduce all of your CDN etfs by simply holding an index fund...that is basically what you have now.
> 
> I agree with your own advice of 4-5 broad based funds/etfs.


While I think that 19 is way too many, I personally believe the 4-5 is too few. A broad-based CDN index tracking ETF will not have any exposure to small-cap companies.

A broad-based EAFE index fund also has little to no exposure to mid- and small-cap holdings.

REITS are another asset class shown to provide good diversification.

4-5 just doesn't cut it IMHO.

However, what I see as superfluous are things like the CDN Energy, and CDN Materials, global precious metals (all 3 of these sectors are already heavily weighted in the broad CDN market). There are already many tech and dividend paying co.'s in the broad-based US indexes so those can be cut also. BRIC, latin america & EEM? Stick with one.


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## OhGreatGuru (May 24, 2009)

To get back to your original question, one large CDN bond fund is all you need, and PH&N's record in this field is pretty hard to beat.


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## Robillard (Apr 11, 2009)

OhGreatGuru said:


> To get back to your original question, one large CDN bond fund is all you need, and PH&N's record in this field is pretty hard to beat.


I don't know about the holdings of some of these funds, but some of them are clearly mutually exclusive, so the OP'er would be losing some diversification by getting rid of all of the holdings. Interest rates worldwide do not move in lockstep, so there is a case to be made for getting international diversification (whether it's worthwhile in light of management fees is another matter).


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## andrewf (Mar 1, 2010)

mogul777 said:


> Why the heck would anyone need 7! bond funds? And why would you keep the one with the highest MER? Rule #1 buy the bond fund with the lowest fees.
> 
> High yield and corporate means the same thing so you may actually want to learn about bonds before you decide what to do this time.
> The interest rate just went up so you've got a window of time to ponder this... and to discover that bond prices are not mainly driven by interest rate movements.
> ...


This is not correct. High Yield is corporate debt, but usually corporate means 'investment grade' corporate debt, with lower yields and risk.


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## mogul777 (Jun 2, 2009)

andrewf said:


> This is not correct. High Yield is corporate debt, but usually corporate means 'investment grade' corporate debt, with lower yields and risk.


In the world of mutual funds these terms are used interchangeably.


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## Broke (May 11, 2010)

OhGreatGuru said:


> To get back to your original question, one large CDN bond fund is all you need, and PH&N's record in this field is pretty hard to beat.


I agree, I have that fund in my portfolio and that fund has been doing lately better than many equity funds. Recently, one of the PHN associates took offence when I jokingly referred to their High Yield Bond Fund as containing "junk bonds"....


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## OhGreatGuru (May 24, 2009)

Robillard said:


> I don't know about the holdings of some of these funds, but some of them are clearly mutually exclusive, so the OP'er would be losing some diversification by getting rid of all of the holdings. Interest rates worldwide do not move in lockstep, so there is a case to be made for getting international diversification (whether it's worthwhile in light of management fees is another matter).


Any large CDN long-term bond fund will be pretty d****d diversified already.


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## celishave (May 8, 2010)

Owning just one bond fund is not enough in my opinion. I believe that PH&N bond fund last year had GMAC bonds as it's number one holding - something around 10%. If they had defaulted (which they came close to judging by the yields to maturity of these things at the end) that would have been a pretty big blow to the fund. Most of us don't look at what these funds/ETF's actually hold due ot their perceived safeness. By having 4-5 funds you will be just that much more diversified.


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## OhGreatGuru (May 24, 2009)

celishave said:


> Owning just one bond fund is not enough in my opinion. I believe that PH&N bond fund last year had GMAC bonds as it's number one holding - something around 10%. If they had defaulted (which they came close to judging by the yields to maturity of these things at the end) that would have been a pretty big blow to the fund. Most of us don't look at what these funds/ETF's actually hold due ot their perceived safeness. By having 4-5 funds you will be just that much more diversified.


I can't speak to what they held last year, but currently GMAC does not appear in the top 10 holdings of the PH&N Bond Fund D. This fund has an MER of 0.58%, is top ranked by most financial sites, and has had a sterling record for decades. If you think you can outguess the bond traders at PH&N you should be running your own bond fund.


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## Belguy (May 24, 2010)

As a rule, I invest in ETF's ahead of managed funds but today's bond environment makes me nervous and I just feel better leaving it to professional bond managers realizing that is no guarantee of negative returns during a rising interest rate environment.

That said, I still hold ETF's for Canadian and U.S. investment grade and high yield bonds for diversification purposes.

I have never liked the 'all eggs in one basket' approach.


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## celishave (May 8, 2010)

OhGreatGuru said:


> I can't speak to what they held last year, but currently GMAC does not appear in the top 10 holdings of the PH&N Bond Fund D. This fund has an MER of 0.58%, is top ranked by most financial sites, and has had a sterling record for decades. If you think you can outguess the bond traders at PH&N you should be running your own bond fund.


I never said I could do better than their bond traders and simply stated you should have more than just one bond fund. Also the GMAC bonds they had expired last summer so of course they are no longer on the top 10 - if GMAC would have defaulted on their bonds you would have taken a beating on this fund.


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## andrewf (Mar 1, 2010)

mogul777 said:


> In the world of mutual funds these terms are used interchangeably.


Roll your eyes all you like. Many providers offer 'high yield' funds that consist of below-investment grade securities as well as 'corporate' bond funds that typically consist of investment grade corporate debt. Please go ahead and list all these 'corporate bond funds' that consist of sub-investment grade debt.


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## mogul777 (Jun 2, 2009)

andrewf said:


> Roll your eyes all you like. Many providers offer 'high yield' funds that consist of below-investment grade securities as well as 'corporate' bond funds that typically consist of investment grade corporate debt. Please go ahead and list all these 'corporate bond funds' that consist of sub-investment grade debt.


Why would I waste my time on such a pointless exercise. You can if you like. My point was very simple, nothing more needs to be said. Perhaps you struggle to comprehend simple things??


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## andrewf (Mar 1, 2010)

Why should I search for evidence for something that I claim doesn't exist commonly?


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## mogul777 (Jun 2, 2009)

andrewf said:


> Why should I search for evidence for something that I claim doesn't exist commonly?


Because you're trying to prove me wrong and wanting me to do it for you. Even with a fraction of my brilliance I wouldn't fall for your petty idiocy. FYI, many a greater man than you has tried and failed.


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## davext (Apr 11, 2010)

I agree with a few bond funds or separate bonds instead. 

You need some corporate bonds short and long term, and you need government bonds, short and long term. You need to be able to adjust your allocation in each of these categories as well. I may want to be 80% short term government, and 10% long term, and 90% corporate short term, and 50% corporate long term. I would never invest in long term corproate bonds as you never know what happens to a company in such a long period.


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## andrewf (Mar 1, 2010)

mogul777 said:


> Because you're trying to prove me wrong and wanting me to do it for you. Even with a fraction of my brilliance I wouldn't fall for your petty idiocy. FYI, many a greater man than you has tried and failed.


I think your rolleyes key is jammed. 

Someone as wise as yourself ought to realize that one cannot prove a negative. I have searched and came up short in finding a 'corporate bond fund' investing exclusively in high yield corporate debt. Shocker. I take your inability to supply even one such fund as evidence that you are similarly unable to find such a fund.


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## mogul777 (Jun 2, 2009)

andrewf said:


> I think your rolleyes key is jammed.
> 
> Someone as wise as yourself ought to realize that one cannot prove a negative. I have searched and came up short in finding a 'corporate bond fund' investing exclusively in high yield corporate debt. Shocker. I take your inability to supply even one such fund as evidence that you are similarly unable to find such a fund.


Actually it's just one mouse click. 

You seem to lack comprehension of how things work. A statement is made, it is challenged, a wish to disprove it is stated, the wisher then sets out to disprove the original statement. It is not up to the person making the original statement to prove it true let alone to prove it false. You perhaps can relate this to the whole innocent until proven guilty scenario? As you have a habit of doing you erred in suggesting I wasn't able to find such a fund. Since I wasn't the one that said such a fund did or did not exist I wouldn't bother looking. 
I do thank-you for the humour you add to this forum. You of course won't get that either. Here's a tip for your future, don't try to disprove a simple generic statement because it will be impossible to do so conclusively. Checkmate.


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## humble_pie (Jun 7, 2009)

two biggies among junk bond etfs are JNK & HYG. Both of the sponsoring companies, state street & ishares, combine the terms "high yield" & "corporate bond" to name their products, as in " the iShares iBoxx $ High Yield Corporate Bond Fund ... "


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## andrewf (Mar 1, 2010)

Oh jeez. That is exactly what I said. There are no 'corporate bond funds' that are comprised exclusively of high yield. Such funds are referred to as 'high yield corporate bonds'.

You made a claim, and I asked you to provide evidence to support it.

I'm sure you've heard of the teapot fallacy: I can claim that there is a teapot orbiting that Sun somewhere between, say, the Earth and Mars. You can't disprove it. The burden is on me to prove its existence, not on you to prove its non-existence.


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## mogul777 (Jun 2, 2009)

LOL. Some people just don't know when to quit. So now you're debating with yourself? How's that going for you? So is there no winner or no loser? Perhaps that is where your delusions of grandeur originate from? 

Actually I know what I said was right therefore I have no need to prove it to myself. You felt a need to disprove therfore the onus is on you to disprove it. You can twist "the rules" anyway you like to fit your needs, but that won't change the simple fact that your wrong and idiotic for challenging something you had no chance of disproving. Trying to pass the buck is hardly a victory... and you know Internet posting is hardly a competition so live and learn and quit being such a dufus.


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## andrewf (Mar 1, 2010)

Hey, I'm not the guy tossing insults like twelve year old on the jungle gym. I'm just correcting your factual inaccuracy. Most people have the grace to accept minor corrections. Apparently this is something you need to work on. It comes with maturity, which based on your demeanor here, is something that you have not yet gained.


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## mogul777 (Jun 2, 2009)

andrewf said:


> Hey, I'm not the guy tossing insults like twelve year old on the jungle gym. I'm just correcting your factual inaccuracy. Most people have the grace to accept minor corrections. Apparently this is something you need to work on. It comes with maturity, which based on your demeanor here, is something that you have not yet gained.


I corrected your factual inaccuracies. You made an idiot of yourself and still refuse to admit it. Which one of us is the child here... I don't need to "toss insults" when you put your ignorance on display for all the world to see. Think then post would be a good motto for you. You may also want to reread this thread to clue yourself in. And for good measure...


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## FrugalTrader (Oct 13, 2008)

Lets stay on thread topic please.


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## humble_pie (Jun 7, 2009)

(off topic) he's right about the teapot, though. Whenever i beam past i try to grab a steaming cup.

(signed)
scotty


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## MoneyGal (Apr 24, 2009)

I always assumed that's where Picard's tea comes from, personally.


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