Going Risk-Off: The 3 Best Funds for Junk Bonds

These funds offer the high yields and diversification need in a volatile market

    View All  

Junk bonds, and the mutual funds investing in them, had a difficult 2015. But that doesn’t mean investors should ignore this high-yield area of the market now.

Instead, the market for junk bonds in 2016 requires one particular virtue — selectiveness.

Stay far away from the funds that have excessive allocations to the distressed and illiquid. Simply put, pick your junk with the tenacity of a dumpster diver.

Exemplary of junk bonds to avoid: Third Avenue Focused Credit (TFCIX), which closed to investors on Dec. 10 and was placed into liquidation by its board of trustees.

TFCIX had focused allocations of 5% or more on distressed names like Clear Channel Communications (CCO). By its closure, TFCIX had lost 30% in 2015, whereas the average high-yield bond fund shed just about 4%.

So with the lessons learned over the past year, the best junk bond funds to buy now are broadly diversified among the higher quality junk bonds.

Next Page 

Article printed from InvestorPlace Media, http://investorplace.com/2016/01/junk-bonds-funds-fsahx-vwehx-fagix/.

©2016 InvestorPlace Media, LLC

Comments are currently unavailable. Please check back soon.