Investing in High Yield Bond Funds can deliver capital appreciation and dividend income.  

Key benefits of investing in high yield bond funds:

• Yields above most other interest-bearing investments.
• Lower volatility than stocks but can benefit from rises in equity prices.
• Reduced overall portfolio volatility when combined with an equity portfolio.
• Professional fund managers provide diversification and manage bond insurance.
• Hedge against rising interest rates.

High yield bonds, or "junk bonds" as they are widely known, are debt instruments issued by publicly-traded companies that need to raise funds to finance various aspects of their business operations such as building new factories, expanding product lines, entering new markets, financing acquisitions, or even buying back shares of their own company stock. 

Ratings companies such as Standard and Poors (S&P) and Moody's provide ratings for corporate debt that represent their assessment of the relative risk of default.  Any bonds rated "BB" or below are considered 'junk' bonds (see "Bond Ratings" below).  These bonds offer higher yields and therefore larger dividend payments than investment grade bonds to compensate purchasers for their lower debt rating.

The junk bond market is massive with over $500 billion in outstanding bonds that pay dividends typically ranging from 4% to 9%, well above U.S. treasuries (widely considered the safest debt but also the lowest yielding).  The historical long-term default rate for junk bonds was 5% from 1980-2010, with 2010 defaults coming in at a paltry 1.3% according to Fitch ratings.

Individual junk bonds are traded almost exclusively by professional money managers.  High Yield Trader, a high yield bond fund timing system, gives you access to the best high yield fund managers and then adds an advanced market timing system protecting your investment from downside market risk, something that few, if any, professional bond managers will ever do (simply look at a the 2008 returns for any high yield bond fund and you'll see how these fund managers completely failed to protect their investors).

High Yield Trader will help you maximize your returns when investing in high yield bonds. Using the High Yield Trader buy signals, our example fund, the Janus High Yield Fund (JAHYX), has returned over 55% in the last 3 years, with a 7.4% annualized return since 1999 with a maximum drawdown of only 6.8%!  See the "Results" pages for more details about the returns (past performance is not necessarily indicative of future results).

Of course, the skill in managing your high yield portfolio comes in knowing when to be in the market and when to move to cash.  Mutual fund managers are excellent at seeking out high yield bonds and protecting against default and now with High Yield Trader you can successfully apply market timing to high yield funds and capture the benefits of both above market yields and capital appreciation.  Please see "Results" to see our proven track record.

Bond Ratings

Bonds are rated based on the probability of the borrower defaulting on the bond, that is eventually failing to meet the terms of the bond covenant. The highest quality bonds, those with the greatest probability of paying back the loan principle and interest, are rated AAA. As the chances of a bond default increases, the lower the rating on the bond, as illustrated in the table  below.