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How do I choose the best junk bond ETFs?

In choosing the best junk bond ETFs, Forbes Advisor has focused on higher-quality, shorter-duration junk bond funds. Given the current economic uncertainty, high-yield investors would be well advised to stay at the BB-end of the rating scale. *Data sourced from Morningstar Direct, current as of June 5, 2024, unless noted otherwise.

Do higher interest rates make junk bonds a good investment?

Fixed income is a core component of a well-diversified investment portfolio, and higher interest rates can make shorter-duration junk bonds particularly attractive for income investors. Higher rates can boost returns over time as fund managers reinvest cash from maturing issues at higher yields.

Should you discard a junk bond ETF?

As for discarding from consideration any ETF with an expense ratio of 0.65% or higher, it’s because that’s a fair and easy-to-satisfy cutoff. High-yield bond ETFs tracked by Morningstar Direct–a group that includes all junk bond ETFs–average a 0.43% expense ratio.

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