Finding Junk Gems

Physician's Money Digest, November15 2003, Volume 10, Issue 21

If you're tired of piddling returns onmoney market funds and US Treasurysecurities, it may be time to look into junkbonds. Because of their greater risk, junkbonds give you a higher interest rate thatcan pump some life into your bond portfolio.And a healthier economy, whichmakes it easier for companies to pay backdebt, lowers the risk factor. To cut downon risk even further, stay away from individualjunk bonds and go for a mutualfund that specializes in high-yield bonds.These funds are currently up an averageof more than 16% so far this year, severalpercentage points higher than theyield on Treasury bonds. Note: Junkbond funds often act more like stockfunds than bond funds, which meansthey could benefit from a stronger economyeven if interest rates rise.