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Investment Planning Question – Bonds

 

Q: I listen to you most Sunday mornings. On a previous show, you recommended HYG. I am concerned about bonds as an investment and want to know if this bond investment is going to be alright with an rising interest environment?

A: HYG should be less sensitive to rates than government or corporate bonds. However, if rates increase I would expect HYG’s principal value to decrease some. If you want exposure to high yield with less interest rate risk you should look at SJNK. The duration is much shorter and the yield is pretty similar. Also, consider owning floating rate bonds, international bonds, and income commodity or energy related investments to offset some of the pressures of rising rates.


 

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