Howard Pressman, CFP®, Featured in CNBC Article: Are high-yield bonds right for your portfolio? Here’s what you need to know
February 17, 2022 CNBC -
If you’re worried about rising interest rates, you may be eyeing high-yield bonds, which typically pay a bigger coupon and may help offset price declines in your bond portfolio. But these assets may also carry more risk, according to financial experts.
While market interest rates and bond prices typically move in opposite directions, high-yield bonds generally have a big enough coupon to cushion some of that principal loss, said certified financial planner Howard Pressman, partner at Egan, Berger & Weiner in Vienna, Virginia.
Bonds have a credit rating system, gauging an issuer’s ability to cover interest payments and loans by the maturity date.
While investment-grade bonds are considered safer, these assets may pay smaller coupons. And high-yield bonds, also known as junk bonds, may have greater default risk but typically provide a bigger yield.
According to Pressman, advisors often compare the “spread” between bonds’ coupon rates when deciding whether to purchase high-yield bonds.
Read the rest here.