high yield funds?

[fisemper]

I have always been interested in high yield funds because I originally started "investing" using a money market account and liked the higher interest rates over savings accounts. Since, I have invested a lot but now I would like to focus on just high yield funds/etfs. I am long on PHYZX and it provides a nice 13-15K per year in dividends. I am not sure if the current price will hold, however it has been around for a long time. I use Schwab and was looking at their options. SCYB is the closest in TTM @ ~7% so I like it, plus it has .03% fee compared to .56%.

Over the long term, if you had to make a choice is this a viable option to switch? SCYB is fairly new compared. One of my goals is to start reinvesting the dividends since I don't need them right now. My concern is the actual price of PHYZX dropping. It can happen to any, however since I have had it on my watchlist the NAV has gone down at least 20% before a slight rebound. I figured the SCYB is more diversified so may be a better option. Thoughts?

 

[AudiDudi]

https://www.cefconnect.com/ has a fund screener where you can set criteria for funds like yield greater than 8% leverage less than 20%, etc. and it will provide a list of funds.

 

[aja8888]

SCYB:

"It is the fund’s policy that under normal circumstances it will invest at least 80% of its net assets in below investment grade bonds."

Kind of risky. Junk bonds.....

 

[fisemper]

I thought most all high yields do this.

 

[aja8888]

I thought most all high yields do this.

Yes, most do, but look at FFRHX which is a bank loan fund, It's also rated Morningstar 5 stars.

FFRHX - Fidelity ® Floating Rate High Income Fund | Fidelity Investments

Analyze the Fund Fidelity ® Floating Rate High Income Fund having Symbol FFRHX for type mutual-funds and perform research on other mutual funds. Learn more about mutual funds at fidelity.com.

fundresearch.fidelity.com

 

[Koolau]

As long as you're okay with the risk, potential reward and fund costs, why not go for it?

 

[fisemper]

L

Yes, most do, but look at FFRHX which is a bank loan fund, It's also rated Morningstar 5 stars.

FFRHX - Fidelity ® Floating Rate High Income Fund | Fidelity Investments

Analyze the Fund Fidelity ® Floating Rate High Income Fund having Symbol FFRHX for type mutual-funds and perform research on other mutual funds. Learn more about mutual funds at fidelity.com.

fundresearch.fidelity.com

Looks good, but Schwab is throwing their transaction fee on this($75 ). Probably why it never showed in my searches.

 

[Montecfo]

I would go out on Morningstar and find the performance of that fund and comparable funds. That should aid your choice.

I think looking at CEF connect as someone else suggested is another good idea.

I assume this is just a portion of your bond allocation, or even substituting for part of your equity allocation. I would certainly not want to put a large portion of my bond allocation into junk bonds. But that's me.

#1 rule: know what you own and understand the interplay of duration and changes in interest rates.

So many people have been surprised when their bond funds fell in value in 2022 when the FED started raising rates. But this performance was actually expected given the dramatic change in rates and the duration of the bonds in the fund.

 

[Phroig]

L

Looks good, but Schwab is throwing their transaction fee on this($75 ). Probably why it never showed in my searches.

The TRP fund PRFRX is equally good and should be available at Schwab. You should be aware that if the Fed starts cutting aggressively, these yields will fall, potentially without a compensating increase in asset values. If there’s a recession, some bank loans will be in trouble.

 

[audreyh1]

Those bank loan funds can suddenly get hit very hard if there is a hint of slowdown or recession.

 

[aja8888]

Those bank loan funds can suddenly get hit very hard if there is a hint of slowdown or recession.

t's the risk you take for the higher yield (as we all know). Equities will get demolished also.

 

[audreyh1]

t's the risk you take for the higher yield (as we all know). Equities will get demolished also.

Bank loan funds usually get demolished along with the equities. They are highly correlated. So I figure I might as well own equities instead of bank loan funds. But then again I’m not an income investor, so I don’t stretch for yield.

 

[aja8888]

Bank loan funds usually get demolished along with the equities. They are highly correlated. So I figure I might as well own equities instead of bank loan funds. But then again I’m not an income investor, so I don’t stretch for yield.

I'm more of an income investor as I get into my early 80's. I have several CDs/bonds,Gov securities going out to 2027 - 2028 that are paying 4.75 - 5.25 %+. Like pb4uski, I have a spread of fixed income investments (no bond funds) and a small percentage of a whole market equity ETF and several preferred stocks (long held). Unfortunately, my TIRA is twice my brokerage account in value and making IRA conversions is not a good idea for me due to income trigger points as a widower.

I'm seeing friends dropping like flies or ending up in nursing homes, so I am getting more and more conservative. Besides the investment accounts, I own two houses free and clear in Texas, one for me and the other for DD and her husband.

Investments are a second thought for me these days. What's a more important use of my time is spending quality time with my small family and long term friends. No one from Schwab will be a pall bearer for my casket (or even attend the service) when it's my turn, but my family and friends will be there.