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Mathjak mentioned the fund FFHRX for a high yield bond fund option on the forum here and I like it for multiple reasons, it puts out distributions on a monthly basis, the yield is quite high (around 8.4% annually), and the price doesn't fluctuate much.
So, I have some questions:
First, is there other funds like FFHRX from other brokerages? My personal account is schwab and I want my risky assets in my Roth and my safe assets in my personal brokerage, but Schwab won't let me trade FFHRX since that's a Fidelity fund.
Second, what's the risk associated funds like this? My assumption is that the yields won't fluctuate much unless things get really bad from a earnings perspective and companies start defaulting. So there won't be much upside or downside unless things get pretty bad. So the risk / reward is higher yields at the risk of potential fallout if things get really bad.
Third, my use of the fund is as a fixed income holder where I put money in as I get gains and take money out when there's 10% shifts downward, kind of like a balancer. Is this a reasonable approach? For money that I need for sure, I think cash / money market is the only safe option. For inverse diversification, it seems like govt bonds would be the better option there - though I don't feel like investing in those at the moment
ffhrx is not in anyway to replace cash or money markets .
it is a form of high yield fund more akin to stock like behavior then bonds .
if you google cross overs to etfs or equals nothing really comes up as an equal ….i own it but it is part of an income portfolio with four other types of funds and none are a substitute for cash instruments, rather they go with cash instruments as part of a low volatility portfolio.
the fund plunged in 2008 so it is not like cash , but that was because even the most conservative funds ended up holding toxic paper .
my money market broke the buck and was shut down in 2008
it is not like other high yield funds as the loans are very short term and as such it isn’t effected much by interest rate moves as well as when rates move up the funds yield goes up.
These are floater funds and are high risk loans. If we really want to participate in the space, there are leveraged CEFs, FSCO being one of them. 11.4% yield 19.45% 1 year return. LONZ is another steady eddy performer in the space. Be careful with these.
Fidelity has the space rated as attractive out to nine months, then neutral after that.
Last edited by COcheesehead; Yesterday at 01:54 PM..
Regarding FFHRX: the 30-day SEC Yield AS OF 04/19/2024 is 8.68% -- which is remarkably high. However, its YTD yield is 2.52%.
I prefer to look at the 30-day SEC yields. https://en.wikipedia.org/wiki/30-day_yield. In the United States, 30-day yield is a standardized yield calculation for bond funds. The formula for calculating 30-day yield is specified by the U.S. Securities and Exchange Commission (SEC). This facilitates fund-to-fund comparisons.
At any rate, here is one thing to look at in this fund & its risk. That's a lot of BB rated bonds. One thing that I can't deduce is which of these bonds (if any) are insured.
SEC yields while standardized do not give you an accurate picture of current yield. For that you must look at distribution yield. SEC yields are based on a moment in time that will not change, but funds change likely daily.
Thanks all! FSCO looks like it had huge gains, which looks like it's too speculative for my purposes. LONZ seems to be somewhat related and may be the best corralary. There's funds like FAFRX, but the main problem is fees. Short term fees, initial load fees etc etc... All seem to be strapped with a lot of these fees, which make them a lot less attractive.
I know it's not a cash replacement as they do drop a decent amount (though still less than stocks) when things get shaky, but I like the correlation they have to the rest of my portfolio. I don't even know what category to categorize these funds as
I lot of my portfolio is either small cap value or Latin America / Canada, which are immediate interest rate sensitive due to exchange rates, but aren't as correlated with overall US economy performance as standard US stocks. So, I liked FFHRX because it wasn't interest rate sensitive like other bonds are, which would make my portfolio too coordinated to Mr Powell. So if the US stays strong and rates stay high, these funds do good. If the US economy slows down and rates drop, the international goes up (or at least not down as much as domestic). All of them punch out good dividends and should be pretty uncorrelated with AI and the Big 7, which is my job income.
Mathjak mentioned the fund FFHRX for a high yield bond fund option on the forum here and I like it for multiple reasons, it puts out distributions on a monthly basis, the yield is quite high (around 8.4% annually), and the price doesn't fluctuate much.
So, I have some questions:
First, is there other funds like FFHRX from other brokerages? My personal account is schwab and I want my risky assets in my Roth and my safe assets in my personal brokerage, but Schwab won't let me trade FFHRX since that's a Fidelity fund.
Second, what's the risk associated funds like this? My assumption is that the yields won't fluctuate much unless things get really bad from a earnings perspective and companies start defaulting. So there won't be much upside or downside unless things get pretty bad. So the risk / reward is higher yields at the risk of potential fallout if things get really bad.
Third, my use of the fund is as a fixed income holder where I put money in as I get gains and take money out when there's 10% shifts downward, kind of like a balancer. Is this a reasonable approach? For money that I need for sure, I think cash / money market is the only safe option. For inverse diversification, it seems like govt bonds would be the better option there - though I don't feel like investing in those at the moment
not the same because those funds have interest rate risk while the shorter term fhrxx does not . in fact the rate floats so it changes ..there really isn’t anything i know of like it
This fund uses a diversified leveraged-loan strategy focused on investing primarily in loans that banks have made to non-investment-grade companies. Because of credit risk, it offers a premium yield, but is also at greater risk of default in an economic downturn, especially if the downturn is accompanied by a sharply reduced rate of inflation. On the plus side, most of the loans held in this fund's portfolio have adjustment mechanisms so that the rate of interest paid rises with prevailing interest rates. That makes this fund relatively insensitive to interest rates.
Loan defaults are the biggest risk factor here, but the fund’s very short duration - combined with Fidelity’s expertise in assessing credit risk - make it less volatile than other high-yield bond funds. And to the extent that the yield curve remains flat or inverted, it may also be able to throw off a more robust income stream (the drawback, of course, is that capital appreciation potential is very limited).
I also might add in the junk category that interest rate risk is amplified because it not only discounts the capital of the holding at the lower rates but rising rates also puts stress on the junk category with default risk.
Its no place to replace cash. Its a bet on the direction of interest rates , and in this case lower or at least flat.
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