High-Yield ETF Performed Well Amid Turmoil

We would need to see how HYG does compared to the CEFs when the next bull market/economic expansion starts before being able to conclude that HYG is better for all seasons, and I would expect that in an economic upswing the potential volatility of the CEFs might be beneficial, and they could outperform at that time.

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The makeup of the fund is very similar to what it was last September. The yield has increased to 8.62% from 7.41%, but the payout should be expected to vary from month to month. The weighted average maturity is 6.9 years down slightly from 7.11 years. The average credit rating is still B-minus.

HYG has 50 holdings, most of which are about 2% each of the fund, and no issuer has more than one bond represented in the fund, so there is good insulation against default.

The fund is less volatile than some similar CEFs, but from peak to trough over a period of 10 months, it still dropped almost 15%.

The role that high yield -- and by extension, HYG -- plays in a portfolio is to the riskier portion of the fixed income allocation. For most folks, it probably doesn't make sense to exceed 10% of the fixed income side in high yield.

The 15% decline in a fund held at 10% would obviously work out to only a 1.5% drag on the entire portfolio, which seems reasonable.