Although I don’t plan on making fixed income part of my retirement plan I thought that I’d highlight some interesting facts from an article I read recently by Neil Reynolds on www.globeinvestor.com
In his article Mr. Reynolds makes the case for investing in a basket of high-yield non-investment grade bonds instead of investing in a single triple A rated bond. He states in his article “it is a fact that most high-risk borrowers make their mortgage payments. Therefore you can achieve - depending on the bundle of mortgages you buy - a risk not much greater than a triple-A security. A portfolio of non-investment-grade bonds offers risk-adjusted returns greater than that of an investment-grade portfolio.”
Just something to think about before you buy your next AAA rated 5% government bond.