Today with some innovations in investment area, the average investors are not satisfied by the very low interest rates i.e. 2%-6% a year. New technology has made possible for them to earn more from their capitals and they are always seeking new investment ways and opportunities with higher rates yet with the minimum risk. One of these ways is high income fund or high yield fund investment. The investors can expect a yearly yield of 10% or higher in this type of investment and at the same time keep the risk reasonably at a low level.
Somebody may ask how such high interest rates are possible with high income fund investments. The answer is that such funds invest in low quality or low grade bonds. The risk of such investments are more than the so called high grade bond funds but still reasonable. So, these low quality bonds are suitable for small investing capitals and the investors with large amount of capital should turn to high grade funds because the payment by low quality funds is not guaranteed and they may don’t pay back the bond owners in a bad market situation.
Because of the average higher risk of these high income fund investment opportunities, the investor s should tightly manage their investments. Making a good diversified portfolio is a must for average investors and they have to manage their investments such that in case of a part of bonds going bad they can still be compensated by the rest of the bonds. Although diversification is a general strategy in almost all risky investments but it plays a very important role in this type of investment.
Another strategy to make the investment risk lower is time diversification. This means that the investor buy low quality high income fund gradually during all times of the year (i.e. spread the investment along all months of the year). For example, if you want to invest $60,000 in bond funds, you make this investment in $5,000 monthly increments. This way you will minimize the risk of investment in a bad market time.
Because of the nature of this type of investment (exact diversification and intense capital management and analysis), the investors usually can not enter to this type of business without help of an expert agency (fund manager). The key factors to select such managers are the reliability and reputation of the company and at the same time low rates of high yield fund management expenses.
Today, investment in high income funds is become more and more popular and many stock and equity investors take the advantage of this type of investment because it is much safer than traditional stock investment (has not the vast fluctuations of prices and is more liquid than small stocks). High yield fund managers are very professional investment analyzers and can diversify the bonds such that they nearly become risk free. If the average investor work with a well known fund manager (with the minimum expenses i.e. less than 1%), a very good investment return is quite possible.
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