High Yield Corporate Bonds - A Unique Double Digit Opportunity
Investing in High Yield Corporate Bonds is a great way to both diversify your investment portfolio as well as achieve higher yields than Treasuries and most dividend paying stocks while capitalizing on special situations that arise during market turmoil.
While investing in the corporate debt of individual companies seeking high yields does increase the risk of default of an individual corporation, it also allows investors that are very familiar with a particular company to capitalize on special situations. For instance, consider investors that scooped up corporate debt for Ford Motor Company when it was evident that GM and Chrysler were struggling, but Ford would survive in early 2009. These savvy investors picked up Ford bonds for pennies on the dollar and realized double digit returns in the bond price return, with high yield double digit returns to boot.
Investors should consider that the rate of corporate defaults does increase during time of recession, especially at the tail end. However, the market has already priced in this historical performance, and then some, given the lack of liquidity and fear that still grips the market.
Tax Efficient Income Investing
By investing in High Yield Corporate Bonds in a self-directed IRA or other tax protected account, you can continue to receive income for years while deferring taxes until later, thus further compounding your returns. Depending on your risk tolerance and familiarity with individual corporations, now could be an opportune time to consider high yielding corporate bonds as part of your investment portfolio.
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