FYI: Everyone knows stocks are for growth and bonds are for safety. But there’s an investment that combines the worst qualities of both, and it has long confounded portfolio managers.
I’m referring to high-yield bonds, better known as junk. Most portfolios hold “risk” assets such as public or private equity, tempered by “non-risk” assets such as high-quality bonds. Junk bonds don’t fit easily into that structure because they generate a lower long-term return than risky investments but are far riskier than safer ones. Thus the dilemma: Adding junk bonds to the risk portion is likely to be a drag on growth while including them in non-risk undermines safety. Neither option is appealing.
Regards,
Ted
https://www.bloomberg.com/opinion/articles/2019-04-24/junk-bonds-vex-portfolios-but-investors-love-them
