Best and worst investment ideas for 2014

Best investment ideas: Bank-loan funds
Best investment ideas: Bank-loan funds © Pete Spiro/

These are mutual funds and exchange-traded funds, or ETFs, that contain loans made by banks to highly leveraged companies -- generally companies with below-investment-grade ratings. That makes yields appealing. Many are now higher than 3.5 percent.

Moreover, the payout rates float. So if interest rates appreciate, the funds' payouts will, too. "We're looking for higher rates," says Lou Stanasolovich, CEO of Legend Financial Advisors in Pittsburgh.

"We like (bank loan funds) except in the case of a recession or liquidity crisis like 2008-09. As long as the economy doesn't weaken too much, they should be in fine shape," Stanasolovich says. "Even compared to bonds, bank loan funds offer stable, superior returns in a rising-interest-rate environment."

While some risk arises from the low ratings of the loans in the fund, they are generally senior secured loans, Stanasolovich says. That means the loans are among the first to be paid if the companies go under, and the loans are backed by collateral.

If you're going to buy a fund, Stanasolovich recommends an open-end mutual fund over a closed-end fund, or ETF, because the open-end funds have more liquidity.

However, be warned: Because the funds' loans are predominately below investment grade, some financial advisers say these funds carry more risk than is appropriate for the average investor.


          Connect with us
Product Rate Change Last week
1 Year CD 0.90%  0.02 0.88%
2 Year CD 1.02%  0.01 1.03%
5 Year CD 1.59%  0.01 1.60%
View Rates in your area Search

Learn the latest trends that will help grow your portfolio, plus tips on investing strategies. Delivered weekly.

CDs and Investment

How can I pay myself first?

Dear Dr. Don, You often advise readers to "pay yourself first." It sounds like a fine idea. But I'm wondering how that actually should work. I'd like to know how much or what percentage of my income should be set aside... Read more



Sheyna Steiner

Investing: Sometimes less is more

A sixth grade class played along in an investing throw down among college-level clubs and easily beat all their returns.  ... Read more

Partner Center

Connect with us