Corporate Bond Fund FAQs
Corporate Bond Fund
We believe that this asset class can form a valuable portion of any well diversified portfolio, especially at this point of the economic cycle. With yields of eight to 15 percent a strong case could be made for investors to substitute a portion of their equity exposure for corporate bonds. In addition, we believe there is a higher level of safety in corporate bonds as companies are increasingly willing to pay down debt by cutting dividends and/or issuing equity.
Yield spread is the additional yield a corporate bond provides the investor above the yield of a government bond.
Corporate bonds are most at risk of losing investors money when they are trading at or above par. Why? Because when a bond matures, all the investor gets back is par and a lot can happen before a bond matures.
Currently, corporate bonds are trading below par so traditional analysis would conclude that some of the risk of investing in corporate bonds has been removed.