High Grade Canada
Tuesday, March 2nd, 2010
JNK – SPDR Barclays Capital High Yield Bond ETF
I’ll be the first to admit that my portfolio doesn’t contain enough debt. There are a few reasons for this – first off, buying bonds (especially in Canada) is more difficult than buying stocks (you need to go through a broker – this means big time commissions) and usually requires a much larger investment. In addition, I’m still a LONG ways from retirement, so I don’t mind the volatility of the equity markets and don’t need a steady stream of monthly income. That being said, I’ve been looking at investing in corporate bonds for a few months now and JNK looks like a great place to start.
Click Here to Visit TheStockGuy.com and Learn More About JNK
So what exactly does JNK do? Well, it’s an exchange traded fund that “seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Barclays Capital High Yield Very Liquid Indexâ€. That definition probably wasn’t much help to you, so I’ll try and simplify it: the ETF buys a basket of bonds which are not investment grade (average rating is B2) and pays out the coupon and face value payments to investors. Barclays charges a 0.40% management fee, which is quite reasonable for this type of product. JNK gives individual a chance to buy a group of these high yielding bonds through the stock market, which makes them easier and cheaper to buy and sell (even in small quantities).
Click Here to Visit TheStockGuy.com and Learn More About the Barclays High Yield Bond ETF
The fund is currently yielding slightly above 10% annually, which is quite an impressive return. The share price isn’t overly volatile – its current price of just below $35 is roughly $10 above its 52 week low and $10 below its 52 week high. My belief is that the American economy will strengthen over the next several quarters, but that it will fail to achieve significant growth in the coming years. If this scenario plays out, then the best idea is to move up the balance sheet and invest in debt rather than equity, since debt holders get paid first. Furthermore, I believe credit spreads will contract further over the summer months, boosting the return to JNK’s investors. There is a risk that the fund’s dividend will be reduced as more of these poorly rated companies fail to make their debt payments due to the recessionary environment, but I believe the American economy will improve in time to mitigate this risk factor.
A product like JNK is a great idea for a retirement fund (401k in the US or an RRSP in Canada). Purchase some units at these levels, collect the handsome 10% dividend each year and maybe a few percent points in price appreciation as well, and you should be more than satisfied come retirement time. This ETF is the best way I have found to play the American corporate debt market and it is something I am seriously considering purchasing, especially since there aren’t any comparable products in Canada.
The Stock Guy’s Official Ranking: 8 out of 10
About the Author
The Stock Guy speaks his mind about the market. Click Here to Visit TheStockGuy.com
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1983 Canada Dollar FROM A PROOF SET HIGH GRADE L@@@@K $6.02 |
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1984 Canada Dollar FROM A PROOF SET HIGH GRADE L@@@@K $6.02 |
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1986 Canada Dollar FROM A PROOF SET HIGH GRADE L@@@@K $6.02 |
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1996 Canada LOONIE Dollar FROM A PROOF SET HIGH GRADE $2.25 |
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1924 Canada Small Cent Key date Nice HIGH Grade Coin $8.75 |
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1954 Bank of Canada $100 5 pieces high grade! $504.99 |
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1956 CANADA NICE SET $99.99 |
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1979 Bank of Canada $20 BC-54c 8 pieces High Grade!! $170.00 |
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1936…CANADA…1 Cent…”BEAUTIFUL TONING..HIGH GRADE” $45.73 |
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Canada 1918 5 cents 1897 1 cent high grade coins $0.99 |
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CANADA 1939 SILVER DOLLAR – HIGH GRADE, LOTS OF LUSTER $79.95 |
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1839 CANADA, BIG PENNY-TOKEN, HIGH GRADE-VERY NICE!!! $9.99 |
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UNC 2010 Canada Olympic LUCKY LOONIE High Grade MS $0.99 |
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1850 Upper Canada 1/2 P Token Breton Br 520 High Grade $5.99 |
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1857 Upper Canada 1/2 P Token Breton Br 520d High Grade $5.99 |
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1854 Upper Canada 1/2 P Token Breton Br 520b High Grade $5.99 |
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1971 Bank of Canada $10 High Grade! BC-49c-i 10 pieces $117.50 |
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1934 Canada One Cent Coin Awesome HIGH GRADE COIN L@@@K $0.99 |
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1949 Canada One Cent Coin Awesome HIGH GRADE COIN L@@@K $0.99 |
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High Grade 1931 Canada Canadian Small Copper Cent NR $1.25 |
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Lot of Four Canada Fifty Cent Coins ALL HIGH GRADE $1.30 |
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1947 Canada Small Cent POINTED SEVEN HIGH GRADE COIN!!! $0.99 |
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OLD CANADA 1929 5 CENT VERY SHARP HIGH GRADE $1.99 |
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OLD CANADA 1923 5 CENT VERY SHARP HIGH GRADE $1.99 |
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CANADA SILVER COIN 10 CENTS 1913 HIGH GRADE CANADIAN $3.00 |
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SUPER HIGH GRADE 1963 CANADA 10 CENT MS 65 + $1.99 |
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SUPER HIGH GRADE 1939 CANADA 10 CENT UNC TONED $8.50 |
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OLD 1917 CANADA 50 CENT PIECE HIGH GRADE VF – EF $69.99 |
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VERY HIGH GRADE 1917 CANADA SILVER 5 CENTS CANADIAN $6.78 |
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1870/1970 CANADA DOLLAR HIGH GRADE MANITOBA $0.99 |
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1859 Canada Large Cent Very High Grade Condition Coin $9.95 |
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Canada 1971 Silver Dollar High Grade Gold toned $0.99 |
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CANADA SILVER 5 CENTS 1902 **HIGH GRADE GEM** $9.03 |
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1854 Bank Of Upper Canada Token Super High Grade $26.00 |
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1966 CANADA .800 SILVER ONE DOLLAR COIN .High Grade $11.28 |
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15 Different Canada Large Cents 1859 // 1919 High Grade $9.99 |
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1864-1964 Canada CharlotteTown SILVER Dollar High Grade $9.99 |
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1952 Canada Voyager SILVER Dollar – HIGH GRADE – L@@K $9.99 |
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1881-H CANADA LARGE CENT * HIGH GRADE * FREE SHIPPING $19.95 |
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1908 CANADA LARGE CENT HIGH GRADE $9.99 |
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1887 CANADA LARGE CENT HIGH GRADE $9.99 |
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1886 CANADA LARGE CENT HIGH GRADE $9.99 |
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1906 CANADA LARGE CENT HIGH GRADE $9.99 |
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1882 H CANADA LARGE CENT high grade $9.99 |
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Canada. Lot of 40 High Grade Trade Dollars- Varieties $80.00 |
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1899 Canada Five Cent – HIGH GRADE $0.99 |
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1854 Upper Canada One Penny Token – HIGH GRADE -Br 719 $0.99 |
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OLD 1949 HIGH GRADE CANADA CENT ROLL ASSEMBLED 1960′S $3.85 |