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
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1895 CANADA LARGE CENT AU $24.99 |
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1870 Canada Five Cent Silver High Grade 5 Cent Coin $175.00 |
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1968 CANADA HALF DOLLAR HIGH GRADE $0.79 |
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1909 canada 25 cents silver a high grade $179.61 |
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1914 canada 25 cents silver a high grade $173.79 |
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1874 H Canada silver 25 cents high grade nice coin $169.90 |
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CANADA 5 CENTS 1916 high grade $25.99 |
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1883H 25 CENTS CANADA HIGH GRADE!! $58.00 |
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1963 CANADA 50 CENT COIN EXTREME HIGH GRADE HEAVY CAMEO $17.99 |
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1932 canada small cents a high grade $6.99 |
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CANADA ONE CENT 1913 COPPER KM#21 - HIGH GRADE $4.00 |
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1969 Canada 1 Dollar - LARGE HIGH GRADE COIN BU - LOOK $5.60 |
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1899 Canada SILVER 5 Cents - HIGH GRADE -Very Nice LOOK $4.05 |
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1945 - 5c - Canada High Grade $0.96 |
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1972 - 50c - Canada (MS65) HIGH GRADE $0.96 |
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1937 CANADA P-58D ONE DOLLAR GORDON-TRAVERS HIGH-GRADE $9.95 |
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CANADA 1899 5 Cents 92.5% SILVER High Grade*NICE COIN* $12.00 |
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CANADA 1891 5 Cents 92.5% SILVER High Grade*NICE COIN* $12.00 |
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CANADA 1954 One Cent High Grade!! *NICE COIN* $3.00 |
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CANADA 1910 5 Cents 92.5% SILVER High Grade*NICE COIN* $15.00 |
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CANADA 1926 One Cent High Grade!! *NICE COIN* $5.00 |
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CANADA 1939 One Cent High Grade!! *NICE COIN* $0.99 |
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CANADA 1934 One Cent High Grade!! *NICE COIN* $3.00 |
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CANADA 1913 One Cent High Grade!! *NICE COIN* $5.00 |
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CANADA 1910 5 Cents 92.5% SILVER High Grade*NICE COIN* $5.00 |
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CANADA 1917 5 Cents 92.5% SILVER High Grade*NICE COIN* $5.00 |
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CANADA 1904 One Cent High Grade!! *NICE COIN* $12.00 |
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CANADA 1932 One Cent High Grade!! *NICE COIN* $3.00 |
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CANADA 1911 One Cent High Grade!! *NICE COIN* $5.00 |
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CANADA 1936 One Cent High Grade!! *NICE COIN* $3.00 |
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CANADA 1917 One Cent High Grade!! *NICE COIN* $5.00 |
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CANADA 1920 One Cent High Grade!! *NICE COIN* $3.00 |
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CANADA 1901 5 Cents 92.5% SILVER High Grade*NICE COIN* $7.00 |
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CANADA 1919 5 Cents 92.5% SILVER High Grade*NICE COIN* $9.00 |
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CANADA 1909 One Cent High Grade!! *NICE COIN* $5.00 |
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CANADA 1916 One Cent High Grade!! *NICE COIN* $5.00 |
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CANADA 1935 One Cent High Grade!! *NICE COIN* $3.00 |
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UNC 2010 Canada Olympic LUCKY LOONIE High Grade MS $0.99 |
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1953 canada 25 cents SD silver high grade unc $66.99 |
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1962 CANADA SILVER $1.00 ONE DOLLAR COIN HIGH GRADE $23.99 |
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1908 CANADA LARGE CENT AU L@@K CROWN DETAILS $13.99 |
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