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By Matthew Lubanko, The Hartford Courant, Conn. Knight Ridder/Tribune Business News
May 11--QUESTION: I recently noticed that high-yield corporate bond funds have done extremely well this year. The top-performing funds have delivered year-to-date returns in excess of 10 percent; the middle-tier performers have also come in with total returns ranging from 6 to 10 percent in 2003.
With an eye on the future, how can I cautiously choose a high-yield bond fund that might deliver respectable returns without excessive risk?
--P.O.G., Coventry, Conn.
ANSWER: When you buy high-yield corporate bonds -- on your own or through a mutual fund -- you're lending money to the nation's spendthrifts and beggars.
Some companies can stay deeply in debt and still pay you back. Some can even dig their way out of debt -- and handsomely reward you for your trust, patience and daring.
Yet some highly leveraged companies collapse under a pile of loans. They have sickly businesses that die a slow death; they cannot generate sufficient cash to meet expenses, including interest payments. They can no longer pretend they're a going concern, and banks and bondholders are …