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post #82 of Old 11-15-2012
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Re: My Escape Plan - Insights Wanted

Originally Posted by davidpm View Post
I'm not an investor but according to this site: US Corporate Bonds Indexes - Bloomberg

Investment grade is 3.35% and high yield is 6.9 if I'm reading it right
So a mix could average out to 5 yes?
"High yield" is a salesman's term for junk bond, or anything below investment grade. Sophisticated investors in these bonds don't buy them just for a few more percentage points in interest. They buy them with some expectation that the company will perform better in the future and become upgraded. Therefore, the value of the bond itself will go up substantially. The risk is that you lose the principal on any that go the other way. Its a very risky game.

Think about how much of the OPs portfolio would have to be at risk to get the portfolio yield up to 5%.

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