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High Yield Bond Fund Recommendation

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Reviewing my portfolio at mid-year and I'd like to move out of Fidelity Capital and Income (FAGIX) and have been searching for a good lower risk high yield bond fund for my IRA.  Seems as though my research finds lots of positives and negatives among the field of strong candidates.  Have narrowed my search to Fidelity Focused High Yield (FHIFX), Vanguard High Yield Corporate (VWEAX), Artisan High Income (ARTFX) and T. Rowe Price Global High Income (RPIHX).  I read the earlier thread initiated by Chang on VWEAX, but wanted to broaden the selection as my IRA is at Fidelity. Was also very interested in MetWest's High Yield (MWHYX) but worried about manager turnover.  Have enough $ in CEFs.  Wondered what recommendations/experiences others might have had in a search for  a good buy and hold taxable high yield OEF and whether I'm overlooking any other strong candidates that aren't recommended by Fidelity, Zacks, Lipper, et.al.  Thanks in advance for your counsel.

Hodey

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Re: High Yield Bond Fund Recommendation

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@norbertc wrote:

 

If it's yield I want, then a good Ivascyn CEF looks more appetizing.

I could see owning HY if it smashed Wellesley or some other conservative investment, but it doesn't. It has neither better returns nor lower volatility. So, what's to be gained?

FWIW,

N.


Recommending a leveraged CEF for income over a high yield bond fund... 

LOL. 

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Re: High Yield Bond Fund Recommendation

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MWHIX/MWHYX is the HY Bond oef that would most appeal to me--quality company and rated low risk by M*.  I don't own it but it would be the fund I would choose if I was interested in HY bond oefs.


@hodey wrote:

Reviewing my portfolio at mid-year and I'd like to move out of Fidelity Capital and Income (FAGIX) and have been searching for a good lower risk high yield bond fund for my IRA.  Seems as though my research finds lots of positives and negatives among the field of strong candidates.  Have narrowed my search to Fidelity Focused High Yield (FHIFX), Vanguard High Yield Corporate (VWEAX), Artisan High Income (ARTFX) and T. Rowe Price Global High Income (RPIHX).  I read the earlier thread initiated by Chang on VWEAX, but wanted to broaden the selection as my IRA is at Fidelity. Was also very interested in MetWest's High Yield (MWHYX) but worried about manager turnover.  Have enough $ in CEFs.  Wondered what recommendations/experiences others might have had in a search for  a good buy and hold taxable high yield OEF and whether I'm overlooking any other strong candidates that aren't recommended by Fidelity, Zacks, Lipper, et.al.  Thanks in advance for your counsel.

Hodey


 

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Re: High Yield Bond Fund Recommendation

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Take a look at SHYG iShares s/t high yield ETF 

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Re: High Yield Bond Fund Recommendation

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@dtconroe wrote:

MWHIX/MWHYX is the HY Bond oef that would most appeal to me--quality company and rated low risk by M*.  I don't own it but it would be the fund I would choose if I was interested in HY bond oefs.


@hodey wrote:

Reviewing my portfolio at mid-year and I'd like to move out of Fidelity Capital and Income (FAGIX) and have been searching for a good lower risk high yield bond fund for my IRA.  Seems as though my research finds lots of positives and negatives among the field of strong candidates.  Have narrowed my search to Fidelity Focused High Yield (FHIFX), Vanguard High Yield Corporate (VWEAX), Artisan High Income (ARTFX) and T. Rowe Price Global High Income (RPIHX).  I read the earlier thread initiated by Chang on VWEAX, but wanted to broaden the selection as my IRA is at Fidelity. Was also very interested in MetWest's High Yield (MWHYX) but worried about manager turnover.  Have enough $ in CEFs.  Wondered what recommendations/experiences others might have had in a search for  a good buy and hold taxable high yield OEF and whether I'm overlooking any other strong candidates that aren't recommended by Fidelity, Zacks, Lipper, et.al.  Thanks in advance for your counsel.

Hodey


 


For "a good lower risk high yield bond fund" I agree with dtconroe.

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Re: High Yield Bond Fund Recommendation

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FAGIX is a very aggressive HY but a good one. It has about 20% in equities - not random, but those where equities make better sense than HY or as supplement to HY. It may actually belong to M* Allocation 15-30% equity. You are already familiar with it, so one option is just to hold less of it [may be 2/3 of your desired pure HY exposure] - end of your HY search.

YBB
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Re: High Yield Bond Fund Recommendation

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If you look at the four HY funds mentioned so far (FAGIX, SHYG, MWHIX and VWEAX), Backtest for the last 5 and10 years has FAGIX in the lead for buy and hold as you suggested taking 4% income annually. Of course that is historical. Did not mention PIMIX since it is not a HY fund.

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Re: High Yield Bond Fund Recommendation

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@Gary1952 wrote:

If you look at the four HY funds mentioned so far (FAGIX, SHYG, MWHIX and VWEAX), Backtest for the last 5 and10 years has FAGIX in the lead for buy and hold as you suggested taking 4% income annually. Of course that is historical. Did not mention PIMIX since it is not a HY fund.


The OP clearly stated that he was looking for a HY Bond OEF that is "lower risk" than FAGIX--The HY funds he "mentioned" as an alternative to FAGIX, were FHIFX, VWEAX, ARTFX, RPIHX, MWHYX.  Other posters mentioned SHYGX which I am not familiar with its risk ratings, and PIMIX which is not a HY Bond fund.  Of the funds the OP mentioned, I believe only MWHYX was rated low risk by M*, if that has any validity to anyone any longer.

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Re: High Yield Bond Fund Recommendation

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Yes he did. I only compared what was was mentioned, since FAGIX was his standard and following in YBB thoughts. The OP also said he was worried about MWHIX but I included it as well.

EDIT: FHIFX  another fund the OP listed performs the worst in my Backtest. ARTFX and RPIHX the best.


@dtconroe wrote:

@Gary1952 wrote:

If you look at the four HY funds mentioned so far (FAGIX, SHYG, MWHIX and VWEAX), Backtest for the last 5 and10 years has FAGIX in the lead for buy and hold as you suggested taking 4% income annually. Of course that is historical. Did not mention PIMIX since it is not a HY fund.


The OP clearly stated that he was looking for a HY Bond OEF that is "lower risk" than FAGIX


 

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Re: High Yield Bond Fund Recommendation

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@dtconroe wrote:

@Gary1952 wrote:

If you look at the four HY funds mentioned so far (FAGIX, SHYG, MWHIX and VWEAX), Backtest for the last 5 and10 years has FAGIX in the lead for buy and hold as you suggested taking 4% income annually. Of course that is historical. Did not mention PIMIX since it is not a HY fund.


The OP clearly stated that he was looking for a HY Bond OEF that is "lower risk" than FAGIX--The HY funds he "mentioned" as an alternative to FAGIX, were FHIFX, VWEAX, ARTFX, RPIHX, MWHYX.  Other posters mentioned SHYGX which I am not familiar with its risk ratings, and PIMIX which is not a HY Bond fund.  Of the funds the OP mentioned, I believe only MWHYX was rated low risk by M*, if that has any validity to anyone any longer.


10 year SD for MWHYX is 5.45 while VWEHX is 6.16.  Meanwhile, growth of 10K is quite a bit higher for VWEHX, about 14% 

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Re: High Yield Bond Fund Recommendation

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Mutual fund performance comparisons are time period dependent. To compare growth of 10K over a ten year period, funds should have statistically equivalent NAVs at the start of the period. Even then not possible to assume performance difference continues.

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Re: High Yield Bond Fund Recommendation

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@bilperk wrote:

@dtconroe wrote:

@Gary1952 wrote:

If you look at the four HY funds mentioned so far (FAGIX, SHYG, MWHIX and VWEAX), Backtest for the last 5 and10 years has FAGIX in the lead for buy and hold as you suggested taking 4% income annually. Of course that is historical. Did not mention PIMIX since it is not a HY fund.


The OP clearly stated that he was looking for a HY Bond OEF that is "lower risk" than FAGIX--The HY funds he "mentioned" as an alternative to FAGIX, were FHIFX, VWEAX, ARTFX, RPIHX, MWHYX.  Other posters mentioned SHYGX which I am not familiar with its risk ratings, and PIMIX which is not a HY Bond fund.  Of the funds the OP mentioned, I believe only MWHYX was rated low risk by M*, if that has any validity to anyone any longer.


10 year SD for MWHYX is 5.45 while VWEHX is 6.16.  Meanwhile, growth of 10K is quite a bit higher for VWEHX, about 14% 


They are both good options but I'm sure you will not look outside VG ;-)

Total Return % (07/10/2020)YTD1-Year3-Year5-Year10-Year15-Year
VWEHX-2.261.73.964.786.395.97
MWHYX3.476.245.465.015.576.28

 

1 year SD(link)...VWEHX=11.8...MWHYX=8.3 and MWHYX performance was better.  

3 year SD...VWEHX=7.9...MWHYX=5.55 and MWHYX performance was better.  

5 year SD...VWEHX=6.8...MWHYX=4.8 and MWHYX performance was better.  

10 year SD...VWEHX=6.2...MWHYX=5.45 and VWEHX performance was better.  

15 year SD...VWEHX=8.35...MWHYX=7.5 and MWHYX performance was better.  

So MWHYX was better for 1-3-5 and 15 years for performance + SD 

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Re: High Yield Bond Fund Recommendation

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I didn't care about SD or CAGR. I only said for 5 years and 10 years after taking 4% income per year which funds had more cash remaining. When I get some more time I may post the numbers but anyone can do that with Backtest. That is all I care about, real world data. Of course it was based on history and that's all we have to use. Investing in equities one gets used to volatility so ifn a fund's balance moves up or down some it is not too important to me. I don't freak out. But the Black Swan did freak me out about bond OEFs.

I like VWEAX but FAGIX was the winner.


@bilperk wrote:

@dtconroe wrote:

@Gary1952 wrote:

If you look at the four HY funds mentioned so far (FAGIX, SHYG, MWHIX and VWEAX), Backtest for the last 5 and10 years has FAGIX in the lead for buy and hold as you suggested taking 4% income annually. Of course that is historical. Did not mention PIMIX since it is not a HY fund.


The OP clearly stated that he was looking for a HY Bond OEF that is "lower risk" than FAGIX--The HY funds he "mentioned" as an alternative to FAGIX, were FHIFX, VWEAX, ARTFX, RPIHX, MWHYX.  Other posters mentioned SHYGX which I am not familiar with its risk ratings, and PIMIX which is not a HY Bond fund.  Of the funds the OP mentioned, I believe only MWHYX was rated low risk by M*, if that has any validity to anyone any longer.


10 year SD for MWHYX is 5.45 while VWEHX is 6.16.  Meanwhile, growth of 10K is quite a bit higher for VWEHX, about 14% 


 

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Re: High Yield Bond Fund Recommendation

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I'll just comment that I am personally a little leery of 3-yr numbers.  It seems to me that a very strong (or very weak) 1-yr might very well be enough to skew the 3-yr outcome.  You'd have to look at it case by case.  I'd be inclined to look at 1-yr, 10-yr preferentially.  5-yr might be ok; no opinion on that.  Or rolling numbers, better yet.

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Re: High Yield Bond Fund Recommendation

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! like 3-yr analysis of a bond fund or portfolio which include good periods and two really bad periods and recent enough to be comparable to present period.

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Re: High Yield Bond Fund Recommendation

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Thanks, a very good discussion on high yield funds that has helped clarify my thinking.  I’ll likely add some MWHYX and sell a portion of my FAGIX. Appreciate your counsel and the time taken to respond to my question.  Always good to have more eyes take a look and opinions from differing perspectives on investment decisions , especially in this time of Covid-19. 
thanks again,

Hodey

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Re: High Yield Bond Fund Recommendation

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Why would you swap equity / income funds for high yield bond funds? At this time? Just curious. 

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Re: High Yield Bond Fund Recommendation

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@galeno the OP is liquidating a position in Fidelity Capital & Income Fund and is looking for a high yield replacement. 


@galeno wrote:

Why would you swap equity / income funds for high yield bond funds? At this time? Just curious. 


 

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Re: High Yield Bond Fund Recommendation

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I understand. But WHY?

My first impulse would be to do the opposite. Swap high yield bonds for equity or equity / income.

Is the US Treasury vs HYB spread attractive? Wishes to lower equity exposure?


@Capital wrote:

@galeno the OP is liquidating a position in Fidelity Capital & Income Fund and is looking for a high yield replacement. 




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Re: High Yield Bond Fund Recommendation

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FAGIX should not be in the HY category. The combo of HY and about 20% in stocks put it in the moderate allocation category.

But, FAGIX SD is higher than moderate allocation funds and why I prefer to use moderate allocation over FAGIX.

Total Return % (07/10/2020)YTD1-Year3-Year5-Year10-Year
VBINX(60/40)2.799.049.138.259.72
FAGIX-4.92-0.583.754.647.03

 

3-Year TrailingSDReturnSharpe RatioSortino Ratio
 
VBINX10.688.460.660.95
FAGIX12.093.560.210.27

 

10-Year  Trailing  SDReturnSharpe RatioSortino Ratio
 
VBINX8.39.81.091.81
FAGIX8.977.070.741.05

 

The above shows that VBINX had better performance, SD, Sharpe, Sortino than FAGIX.

YTD chart is another reminder of FAGIX volatility.

fagix.PNG

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Re: High Yield Bond Fund Recommendation

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Hodey,

I've considered buying a HY fund many times and always decided against. My problem is that I don't see how HY as a buy & hold position complements my portfolio. 

Backtests to 1985 show that Wellesley has higher CAGR and lower volatility than either VWEHX or FAGIX. 

If it's yield I want, then a good Ivascyn CEF looks more appetizing.

I know that Bilperk trades VWEHX from time to time (at least I think he does). He pounces when credit spreads widen relative to IG debt; and sells when spreads come in. This makes good sense to me.

I could see owning HY if it smashed Wellesley or some other conservative investment, but it doesn't. It has neither better returns nor lower volatility. So, what's to be gained?

FWIW,

N.

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