7. High Yield Bonds (5% - 9%)
What are they?
High yield bonds also called junk bonds, they are issued by sub-investment grade companies. Investors receive high yields for taking the extra risk of lending to these lower-rated businesses.
What are the risks?
Recession could lead to surge of defaults of high yield issuers. The high yields reflect the high risks.
Examples
- Index funds, such as SPDR Bloomberg Barclays High Yield Bond (JNK)
- Actively managed funds, such as PGIM High Yield (PHYZX), and Vanguard High Yield Corporate (VWEHX)