Masters in Business · Thursday, July 2, 2026
Stephen Lately addresses the use of high-yield bonds in a ladder, noting that while they offer higher potential returns, they also carry a greater risk of default. He emphasizes that investors must perform a calculated risk assessment to determine their tolerance for such risk.
“And this gets to I think, you know, investor preference, right, So high yield by definition is what it sounds like. However, it comes at a cost, which is you may not get all of that money back because some of it may default. And so that's that's the rub, right, And so I think investors are going to do, you know, sort of a calculated risk assessment on what they're willing to tolerate.”
“Risk Wise, if you put all of your money into a high yield ladder, the yield will most certainly be higher than investment grade. However, the overall performance may not match that initial yield, right because over time, you know, some of those some of those companies may may default and you may not realize exactly the initial yield you did. It'll be something less. And so that's just that's just with any high you'll bond, right.”