Course 306: Getting More Aggressive
Rev Up Your Bond Mix
In this course
1 Introduction
2 Are You Being Aggressive Enough?
3 Shake Up Your Asset Mix
4 Rev Up Your Bond Mix
5 Electrify Your Stock Mix
6 Awaken Your Foreign Mix
7 Test Drive Before You Buy

In addition to altering your asset mix, you can inject some excitement into specific asset groups, too.

Take bonds for example. Short- and intermediate-term bonds and bond funds are commonplace in investment portfolios. To boost your bond component, consider adding one or more of the following types of bonds/bond funds:

Long-Term Bonds
Because the maturity dates of long-term bonds are farther away than those of short- and intermediate-term bonds, long-term bonds tend to yield more. They also tend to gain more when interest rates fall and lose more when interest rates rise.

You can find long-term bond fund ideas using screening tools like Morningstar.com's free Fund Screener. Analyst recommendations such as Morningstar.com's Fund Analyst Picksare also a good source, if you are a Morningstar.com Premium Member.(Nonmembers cansign up for a free trial toMorningstar's Premium Service.)

High-Yield Bonds
High-yield bonds are corporate bonds issued by lower-quality corporations. These bonds carry more credit risk--or the risk that the issuer will default on the debt--than higher-quality bonds do. As a result, they generally yield more than the average high-quality bond.

The returns of high-yield bonds very often follow the returns of the stock market more than the returns of the bond market. Why? Because the performance of high-yield bonds is influenced by the growth and earnings of the company that issued the bond, just as the performance of a stock is influenced by the growth and earnings of the company that issued the stock. Rising or falling interest rates have little bearing on the performance of high-yield bonds.

You can find ideas by using online screening tools such as Morningstar.com's Fund Screener. Using that tool, select the following inputs using the drop-down menus and checkboxes: Fund Group = Taxable Bond; Morningstar Category = High Yield Bond; and MorningstarStar Rating = 4, 5. You can change the inputs to narrow the search further.

Analyst recommendations such as Morningstar.com's Fund Analyst Picksare also a good source, if you are a Morningstar.com Premium Member.(Nonmembers cansign up for a free trial to Morningstar's Premium Service.)

Convertible Bonds
Convertible bonds are stock surrogates even more than high-yield bonds are. That's because convertible bonds can be, as their name suggests, converted into stocks.

We're not going to get into the details of that here. But because of this conversion feature, convertibles behave very much like stocks. They are generally less volatile, though, because they pay a fixed coupon (or yield). They are bonds, after all.

You can find convertible fund ideas by using online screening tools such as Morningstar.com's Fund Screener. Using that tool, select the following inputs using the drop-down menus and checkboxes: Fund Group = All; Morningstar Category =Convertibles; and MorningstarStar Rating = 4, 5. You can change the inputs to narrow the search further.

Analyst recommendations such as Morningstar.com's Fund Analyst Picksare also a good source, if you are a Morningstar.com Premium Member.(Nonmembers cansign up for a free trial to Morningstar's Premium Service.)

Next: Electrify Your Stock Mix >>


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