Corporate Bonds

Gain High-Yield Corporate Bond Exposure with This Fund

The SPDR Bloomberg Barclays High Yield Bond ETF (JNK) tracks a market-weighted index of highly liquid, high-yield, U.S. dollar-denominated corporate bonds.

JNK seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Bloomberg Barclays High Yield Very Liquid Index. It is a cost-efficient way to implement a high-yield exposure, compared to individual bonds.

The exchange-traded fund (ETF), which rebalances its holdings on the last day of each month, is a hugely popular, liquid high-yield corporate bond fund. The ETF’s portfolio is one of the broadest in the segment. It charges a reasonable fee, but its tracking has been a bit sloppy at times, so investors may find the holding costs more than advertised.

The fund trades well, however, so it offers liquidity and has a huge asset base. JNK competes most directly with HYG, an iShares ETF by BlackRock that I featured in last week’s ETF Talk, which also is extremely large and liquid.

Heavily weighted in the United States (81.77%), the fund also is invested in Canada (4.88%) and the United Kingdom (3.17%). Its main two sectors are Industrial (74.08%) and Financial (21.64%). JNK’s overall portfolio composition consists of 98.76% bonds.

Courtesy of StockCharts.com

The fund has more than $10 billion in assets under management, 895 holdings and an average spread of 0.01%. With an expense ratio of 0.40%, it is relatively inexpensive to hold in relation to other exchange-traded funds. It is listed on the NYSE Arca Exchange and has been around since November 28, 2007.

With a 5.55% yield, a monthly dividend distribution policy and a dividend increase of almost 5% year to date, JNK could be a good equity for investors looking to gain high-yield exposure in the bond market.

However, as always, all interested investors are urged to conduct their own due diligence before deciding whether this fund suits their individual portfolios.

Rest assured, I remain as happy as ever to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk and you’ll know where it originated.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.