This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

A Safer Way to Get High Yields

Investors seeking a tamer choice may prefer Franklin Strategic Income. During the past ten years, the fund returned 7.9% annually. Franklin typically has between 20% and 40% of assets in high-yield bonds. The allocation last dipped near the low end of the range in 2007 and early 2008. At the time, confident investors had little concern about defaults, and they bid up prices of shaky issues. As a result, high-yield bonds only yielded 300 basis points (3 percentage points) more than Treasuries. By shifting away from high yield, Franklin limited losses in 2008 and outdid most of its peers. The fund now has 28% of assets in high yield.

Dividend Growth Reveals the Path to Profits >>

Franklin has 18% of assets in floating-rate loans. Those yield about 5.5%. The floating issues are loans made by banks to companies with below-investment grade credit. Because the loans are senior secured debt, they are considered safer than high-yield bonds. In the event of a default, owners of loans are paid before high-yield bond investors receive anything. If interest rates rise, the yields of the floating-rate issues adjust upwards. That helps the bank loans to be resilient during periods when most other fixed-income assets are sinking. "Bank loans tend to be more stable than high-yield bonds," says Eric Takaha, a Franklin portfolio manager.

Another fund that performed well in 2008 is John Hancock Strategic Income. During the past ten years, John Hancock returned 7.8% annually. A year and a half ago, the fund had more than 40% of assets in high-yield bonds. Since then the portfolio managers have lowered the allocation as prices appreciated. Now the fund has 34% of assets in the sector.

John Hancock has been increasing its stake in emerging markets bonds, which now account for 25% of assets. Portfolio manager Dan Janis especially likes bonds from emerging Asian countries, including Singapore, Malaysia, and the Philippines. The Asian economies remain healthy as domestic consumption increases. While credit rating agencies have downgraded the U.S. and European countries, many of the Asian economies have been getting stronger. "Indonesia has been upgraded every year for the last three years, and the Philippines is in the process of being upgraded," says Janis.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $128.46 0.00%
FB $78.97 0.00%
GOOG $558.40 0.00%
TSLA $203.34 0.00%
YHOO $44.28 0.00%

Markets

DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs