Greetings,
I came across the high yield corporate debt family of ETFs, specifically BlackRock's $HYT fund. Has anyone traded/invested in these? Few questions:
They have almost an 8% dividend yield. What are the risks besides the risk on the borrowing firms defaulting, is it more around junk bonds not being a good investment in rising interest rates environments as we perhaps are now in 2016?
I believe these are classified as "tax-free" ETFs, what does that really imply?
I've always been confused about the expense ratio / management fee percentages listed on these fund prospectuses. I mean, if the fund is trading like a stock with it's own ticker, and is liquid wherein I see the price more every second, what is the importance of the management fee / expenses? Isn't it like, I buy at say $10, and I sell at $11, I make 10% realized gain, pre-tax?
Overall, what's the catch with investing in these funds?
Thanks much.
If you're looking for something conservative, then HY is probably the first thing you should avoid. Dividends above 3% should be probed into because there's usually a (negative) reason behind it; either there is little to no capital gains appreciation or the dividend is high because the asset/portfolio recently went to shit price-wise and now has a high dividend yield because of it. In the case of high-yield debt, some of that debt is very likely default and not offer any return on investment
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