Quote Originally Posted by drunk View Post
IMO one of the most underrated and unheralded investment opportunities are high yield bond funds. The bonds they buy are also called junk bonds which turns a lot of people off. It might seem very risky and it would be if you bought 2 or 3 bonds yourself instead of a fund. But the fund manager buys hundreds of bonds at better prices than an individual could get. If he has a few that flame out and default he generally also has a few that soar in value. The risk is considerably less than in most equity funds. My brokerage characterizes several of these funds as low risk. Of course, if there is panic in the bond market which happens from time to time they won't be unaffected. These funds are composed mainly of short term bonds which means they are less sensitive to interest rate fluctuations than long term government bonds. You could easily find a few that average about 6% over time. One of the funds I have has made money every year in the last 10 years except for 2008. And in 2008 it only lost 6.72% when the S&P 500 index dropped 37% after considering dividends.
When asked what [Buffet] thought of junk bonds he replied, "I think they'll live up to their name." (Sorry, couldn't resist).