Sunday, August 16, 2009

Buying JNK while trying to avoid junk

I have been out of junk bonds ever since Milken went to jail. Back in February of this year I was “highly confident” that junk bonds were going to survive. At least I hoped, for I was finally ready to jump back in and wallow around in some junk. Since finding ETF religion I decided that was a good place to look first. I have to respect any company that just says it the way it is. When Barclay named its ETF JNK you just knew they weren’t going to try and BS anyone about the quality inside. Well you know what they say, one mans junk is another man’s tres… Well one can always hope right.

So back on February 10th I picked some up at $31.45 and then watched it continue to sag. (What was the name of this thing again?) On March 2nd I tried again at $27.50. Trying to break bad habits these two investments amounted to a little under 20% of my account. Contrast that to a few years ago when a good feeling, I know I have a winner position would have been over 60% and the whole account leveraged. Oh the good old days.

The investment rationale was that the divvy was so crazy high even if a bunch of the bonds defaulted the divvy would still be 10% plus. All we had to do was avoid the whole capitalism system from going under.

So far JNK has paid out roughly 40 cents per share per month since then. April and May were a tad higher. Did I mention that JNK pays out monthly? (I like that part. Monthly cash; dollars and change that you can believe in.)

Old mindsets are hard to counter. I look at the chart since Feb. and all I see is: I could have jumped in and out here and here and here and there. But alas I haven’t, I sit and wait for the beginning of the month. Until the divvy story changes this chunk of my account will be long and slow with JNK.

Here’s to getting a grip with jumping in and out, fast money, trading and to keeping an eye on your EveryDay Money.

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