High-yield securities happens to be the new fancy name that Wall Street has adorned what was previously known to the masses as "junk" bonds. Buying junk can seem like a risky deal, and it is.
The higher yields an investor receives from such securities is often offset by a significantly higher risk profile, which often effectively negates the value of many of these securities, from a risk-adjusted return perspective.
That being said, a number of funds have attempted to aggregate higher yield, higher return bonds into large buckets and sell off pieces to investors looking to get in on the action.
Perhaps one of the best funds out there right now is the T. Rowe Price Tax Free High Yield (PRFHX) fund which has been around for nearly two decades and has a relatively impressive track record relative to its peers.
This fund has a unique composition, focusing primarily on corporate munis and health-care bonds, and is less focused on some of the higher risk bonds in the high risk pool, providing adventurous investors with a safety blanket, so to speak.
The fund has performed very well over its 18-year history, and, more importantly, has avoided significant losses to the same degree as its peers. In downturns, this fund tends to outperform the majority of high yield funds, making this a "conservative" pick for high yield investors, if there was one.
Invest wisely, my friends.
