High Yield bonds have outperformed Aussie shares over the past 25 years with lower volatility

High Yield bonds have outperformed Aussie shares over the past 25 years with lower volatility. Warren Bird from Cuffelinks says the high yield market usually overpays for risks and delivers very competitive return outcomes when compared to shares and investment grade bonds. Over the long run of 25 years, high yield has returned 11% per annum, compared with 9.5% for Australian shares and 8.8% for Australian bonds. It has done this with 8% pa volatility, which is more than bonds (4%), but much lower-risk than shares (17%). Bird notes that this analysis uses the Bank of America Merrill Lynch BB/B index hedged to A$ to June 2014. That is, the comparison is not based on a handful of domestic bonds, but the well-established US market. Interesting read: (VIEW LINK)


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