Short-Term High-Yield Bond Funds

Although rarely discussed, a diversified short-term high-yield bond fund may be the answer for advisors seeking to maximize return while staying somewhat conservative. For example, the Wells Fargo Advantage Short-Term High-Yield Bond Fund lost < 6% while the average high-yield fund was down > 26% in 2008. Although the Wells Fargo fund has been around for > 15 years, almost all short-term high-yield funds have been in existence for < a couple of years, including: SPDR Barclays Capital Short Term, PIMCO 0–5 Year High-Yield Corporate Bond Index ETF, and the RiverPark Short Term High Yield.

 

According to Lipper, over the past 20 years, the worst 12-month period for equity-income funds was March 2008 to February 2009 (-41%). The average real estate mutual fund lost 48% in just three months between September and November 2008. The worst 12 months for real estate funds was April 2009 to March 2009 (-59%). From March 2008 to February 2009, the typical emerging markets stock fund returned -58%. For high-yield bond funds, the worst 12 months over the past 20 years (1992–2011) was December 2007 to November 2008 (-29%).