Investors are piling into high-yield bonds. What to know before adding ‘junk’ to your portfolio
Charles Sachs, Chief Investment Officer at Kaufman Rossin Wealth, has provided his insights to CNBC for the online article, “Investors are piling into high-yield bonds. What to know before adding ‘junk’ to your portfolio” written by Kate Dore. The story details what investors should know before putting money in high-yield bonds, with quotes from Charles on the greater default risks junk bonds carry and how to allocate them in a portfolio.
“However, junk bonds typically have greater default risk than their investment-grade counterparts because issuers may be less likely to cover interest payments and loans by the maturity date.
‘It’s a shiny metal on the ground, but all shiny metals are not gold,’ said certified financial planner Charles Sachs, chief investment officer at Kaufman Rossin Wealth in Miami.
While some say default risk is built into junk bonds’ higher yields, Sachs warns these assets may act more like stocks on the downside.
If an investor feels strongly about buying high-yield bonds, he may suggest a smaller allocation — 3% to 5%, for example. ‘Don’t think of it as a major food group within your portfolio,’ he added.”
Charles Sachs, CFA, CFP®, is a Chief Investment Officer at Kaufman Rossin Wealth, LLC, a Registered Investment Adviser.