NEW YORK ( TheStreet) -- High-yield bond ETFs have enjoyed surging popularity. During the past year, investors poured $5.6 billion into the two biggest high-yield ETFs, iShares iBoxx $ High Yield Corporate Bond (HYG) and SPDR Barclays High Yield Bond (JNK), according to IndexUniverse.com. Rich yields and strong returns have attracted the crowds. The two ETFs yield around 6.6%, and both returned more than 12% in the past year, according to Morningstar.Can high-yield funds continue rolling? Maybe. But the risks are growing as the share prices rise. High-yield bonds are rated below-investment grade, so they pose default risks. A crisis in Washington could send the low-quality bonds into a tailspin. To limit risk, consider a broadly diversified income ETF. Besides owning high-yield bonds, the diversified choices also hold high-quality assets. If junk bonds sink, the high-quality issues should help to stabilize the portfolios.
Getting Fat Yields by Casting a Wide Net
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