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What's a [retired] man to do, to generate a decent income?!
Jezzer
Posted: 12 March 2018 14:45:35(UTC)
#42

Joined: 14/06/2010(UTC)
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Slink;58582 wrote:
Don't forget that high-yield bonds incorporate two key risk elements. The first, as people have mentioned is interest rate risk; the higher the duration of the portfolio the greater the risk of loss to an increase in interest rates. The second factor, which shouldn't be ignored is credit risk, which is the risk that individual issuers fail to pay the underlying interest and principal of the bond leaving the investor with a loss of income and capital. The risk of holding high-yield bonds is that a spike in credit spreads (which are still historically very low), regardless of underlying interest rates, can leave you with hefty negative returns.




I've always taken the view that, as most bond funds that I've looked at in any detail hold c.200 different bonds, and I have no more than 5% of my pf in any one bond fund, the impact of an individual default or two would be negligible.

Having said that, if something happens in the market that affects the whole asset class (you provide an example above) then this could be more systemic. Food for thought.
Amateur hour
Posted: 12 March 2018 15:23:44(UTC)
#45

Joined: 24/08/2017(UTC)
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EAT now pays four times a year, rather than three. May explain the difference of opinion above... it’s a long standing core holding for me.

I’ve been buying some funds that sell covered calls to boost yield - like the Schroder Maximiser range. I’m surprised they don’t get more attention. Supercharged yields and a bit of downside protection. But there’s no such thing as a free lunch, as they miss out on some/most market gains. But with US prices where they are the new Schroder US Maximiser yielding c5% seems like a sensible one to me...
6 users thanked Amateur hour for this post.
Mr Helpful on 12/03/2018(UTC), Jezzer on 12/03/2018(UTC), Paul Gulbrandsen on 12/03/2018(UTC), antigricer on 12/03/2018(UTC), Tim D on 21/03/2018(UTC), Mike L on 23/03/2018(UTC)
Paul Gulbrandsen
Posted: 12 March 2018 16:42:53(UTC)
#46

Joined: 20/10/2015(UTC)
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Amateur hour;58598 wrote:

I’ve been buying some funds that sell covered calls to boost yield - like the Schroder Maximiser range. I’m surprised they don’t get more attention. Supercharged yields and a bit of downside protection. But there’s no such thing as a free lunch, as they miss out on some/most market gains. But with US prices where they are the new Schroder US Maximiser yielding c5% seems like a sensible one to me...


Thanks for pointing out the Schroder US Maximiser, sounds interesting. I’ve added BlackRock North American Income to my watchlist as they’ve recently increased their dividend from 5.0p to 8.0p to give a yield of c.5%, part of which will be paid out of capital. Bizarrely only 77% of their assets are in the USA - maybe the rest have extensive interests in America?
The Schroder fund is essentially a passive with the managers selling options to achieve the yield. I think I’m happy to give up some capital gains for a 5% yield, particularly given the downside protection that you mentioned. The charges are reasonable too, 0.55% vs BRNA’s 1.08%. I tend to go for ITs but I might make an exception for this as I’m underweight N.America.
1 user thanked Paul Gulbrandsen for this post.
Mr Helpful on 12/03/2018(UTC)
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