NEW YORK ( TheStreet) -- Chairman Ben Bernanke boosted the outlook for most stock and bond mutual funds yesterday when he announced that the Federal Reserve would keep interest rates low until 2015. But investors in bank loan funds had less reason to cheer Bernanke's news. The loan funds rank as one of the few fixed-income assets that thrive during periods of rising rates. When rates sink, the funds can appear less attractive.Should you stay away from the loan funds? Not necessarily. According to Morningstar, the average loan fund yields 4.2%. That's an intriguing payout at a time when 10-year Treasuries yield 1.78%. In addition, a small position in loan funds can serve as an insurance policy, protecting portfolios against the risk of a sudden spurt in rates.
Getting Fatter Yields with Bank Loan Funds
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts