3. Investment Grade Bonds (2% - 3%)
What are they?
They are investment grade bonds issued by government, agencies, and corporations.
What are the risks?
Many triple-B bonds (the lowest rung on the investment grade ladder) - especially in energy and other economy-sensitive sectors - have suffered sharp declines in value and therefore trade at high yield levels, but they may be downgraded by the rating agencies to junk status.
Examples
- Index funds, such as Vanguard Intermediate-Term Corporate Bond Index (VICSX) or IShares Core US Aggregate Bond (AGG).
- Actively managed funds, such as Doubleline Total Return (DLTNX) and Dodge & Cox Income (DODIX).
In next blogpost, we will discuss REITs.