>>>Would really love to hear @Junkster’s take on your question. He’s the expert on HY.<<
Not really as except for a short period last summer haven’t had any meaningful position in junk for several years. I do like CSOAX in that space but it is more of a hybrid junk fund also holding bank loans. I have held that one a few times this year and still hold a position. But bank loans now are massively overbought with a few in that category not having a down day since late May. The epitome of trend persistency. Edit: I have orders in today to lighten up in that category.
One interesting stat on junk bonds that would keep me bullish is since 1980 after a down year (such as 2022) the next year (2023) is always positive and in all instances but one the gains were double digit. Of course in all those previous down years spreads had widened considerably. That was not the case last year. I also would attack junk bonds with an OEF and never an ETF.

@msf I was being a little facetious with "stodgy". I really agree with everything you said. Especially to have some cash on hand for emergencies and know your own spending habits.
It just seemed to me that the overall tenor of the comments constituted a pretty conservative investing approach for a young college graduate.
I favor more of a three pronged barbell approach --- we own several value stocks that are good dividend payers (KO, SO, HSY, MO, XOM, ...), several consistent mutual funds (FXAIX, FLPSX, JORSX, BUFSX, ...), and some more adventurous holdings (FDGRX, AMZN, SBUX, FSELX, ...).
I really believe in science and technology and did very well for years with T Rowe Price Science & Technology Fund in my 403b account.
FSELX (Fidelity's Select semiconductor fund) has a Total Return of about 27% per year for the last ten years -- give something like that a chance in the young man's portfolio.
(Just be willing to endure some ups and downs.)
A question for Bobpa -- does the grandson have a prospective bride (and wedding date) in mind, or is he just hoping to find the perfect mate? :)
In conversation, I used to ask my students
"How did you decide to come to college here?"
Often the answer was "My boyfriend (or girlfriend) was coming here".
"Are you still dating?"
"No, we broke up freshman year".
So much for long term plans made by high school seniors/incoming freshmen.
David

FBALX, hands down. It can be a little more volatile than some AA funds at times but always bounces back. I’ve owned it for about 25 years and it’s my largest holding. I have never considered selling it because it’s consistently excellent. It also has very low expenses and team management, so you don’t have to worry about it faltering when a top manager leaves.

WORD!

You two really deserve each other.

The animosity between Stillers and FD is very longstanding, but the original post on this thread, directed to FD specifically, was not worded in a very inviting or constructive tone. I am a bit surprised FD replied at all.

(Guffaw!)
Yeah, I worked in the fraud bizness for 35+ years and FD, to me and many others, is the quintessential investment forum fraud. So yeah, there's a wee bit of animosity.

You two really deserve each other.

Mona asked a serious, honest question, pretty much knowing she would NOT get a serious, honest answer.
FD deflected, just as he has done since I first read a post of his about 15 years ago.
I duly noted that.
And yet you troll me.
Got it.

crash I've been with Fidelity 30 years with few complaints-hope you can get more comfortable with their website!

Ditto, except 43 years. I'm thinking operator error/unfamiliarity or the rare occasion when Fido has a techno glitch.

crash I've been with Fidelity 30 years with few complaints-hope you can get more comfortable with their website!

Yep, we have discussed PIMIX for years. It's difficult to know exactly what they do at any given time. I used to own a lot of it prior to 01/2018.
But perform Percentile Rank in its category is...1+3 year=20-22...5 years=15. Not too shabby for AUM=124 Billion. PIMIX has much high securitized and lower HY+EM bonds.
Derivative is a complicated subject and difficult to quantify. But, because the ER=0.50/0.51, I think the leverage is very low.
In the past, I posted about RCTIX as a good "cleaner" securitized with better LT risk/reward, see 3 year chart(https://schrts.co/kCDynyVs)
There is a new kid in town...PYLD=Pimco Multisector Bond Active Exchange-Traded Fund. See (https://www.pimco.com/en-us/investments/etf/multisector-bond-active-exchange-traded-fund). Strategy: The Fund seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its assets in a multi-sector portfolio of Fixed Income Instruments of varying maturities, which may be represented by forwards or derivatives such as options, futures contracts or swap agreements. “Fixed Income Instruments” include bonds, debt securities and other similar instruments issued by various U.S. and non-U.S. public- or private-sector entities.
ER=0.55. See below its holdings...mmm... definitely unique.

A lot depends on whether you want a fixed allocation balanced fund or a true asset allocation fund that shifts between asset classes. VBIAX is a simple very low cost 60/40 stock/bond balanced fund—a good fund for beginners. But I don’t think of it as an asset allocation fund.

If a Vanguard fund will be considered, how about VWENX which has significantly outperformed VBIAX over the past 30 years.

@FD1000 I have been reading that you are a proponent of 3-line break. What is it telling you today regarding ORNAX and NHMAX? Please don't come back in three weeks and tell us what it told you on 7-14-23.

mmm...so you want to learn but over the years you weren't so nice.

Racq wants to learn too, and he has been very nice to you.

@FD1000 I have been reading that you are a proponent of 3-line break. What is it telling you today regarding ORNAX and NHMAX? Please don't come back in three weeks and tell us what it told you on 7-14-23.

mmm...so you want to learn but over the years you weren't so nice.

FBALX, hands down. It can be a little more volatile than some AA funds at times but always bounces back. I’ve owned it for about 25 years and it’s my largest holding. I have never considered selling it because it’s consistently excellent. It also has very low expenses and team management, so you don’t have to worry about it faltering when a top manager leaves.

Gosh, this is a stodgy old board!
Not at all. Several people on this site have suggested 100% (or near 100%) equity portfolios for young people. But those recommendations came with the proviso that the person had an emergency fund, or perhaps that the income stream was dead certain. And that there wasn't an alternative investment available with a higher projected risk-adjusted return.
A lot to unpack there. If he had an inherited annuity paying a steady monthly income, that would be one thing. A job without more info is not a certain income. Right now, the economy is at surprisingly full employment (3.6% unemployment). When (not if) the economy goes through a recession, jobs will be at risk. Jobs are always at risk of becoming obsolete. Moving from job to job takes time, which is one of the points of having an emergency fund that will last a few months.
A three stock portfolio of leading names may look good now, but then again, so did the Nifty Fifty. (FWIW, well before my time.)
https://bridgeway.com/perspectives/party-like-its-1972-what-can-the-nifty-fifty-teach-us-about-todays-market/
Building a diversified equity portfolio is a good idea for someone starting out. That doesn't preclude him from first building an emergency fund. (That exercise alone has the benefit of forcing one to budget expenses, including health care if employer coverage is lost.)
Starting out with highly non-diversified portfolio is not a great idea. At the very least, he would be better off diversifying now - sell at least some of the stock (being inherited they likely don't have huge unrealized gains). That's not a buy/sell/hold recommendation on the individual stocks, but a suggestion for thoughtful portfolio management.
Moving on to the alternative: paying down debt. As others have said here, that's 7% return, certain. Many sources project lower returns than that for equity over the next decade. Here's Schwab's take as of nine months ago. Admittedly things so far have gone better than projected last year (inflation coming down, employment remaining high).
https://www.schwab.com/learn/story/schwabs-long-term-capital-market-expectations

(Vanguard and others offer similar projections, though similarly predicated on a 2023 recession.)
Something you didn't mention about the student loan is whether it might qualify for loan forgiveness (should that become a reality) and whether the amount he would pay down would cost him some of that "free" money. That might militate against paying down the loan.
As you said, this is a learning experience for your grandson. Even if the risk of a catastrophic failure is small, should it happen he might not return to investing for years. It would seem to be better to virtually eliminate that risk (diversify now, have a cash reserve), even at the cost of (possibly) reduced returns for now.

Hank, thank you for deleting part of your previous post. There is not a "pure" definition of bond funds and you know it. Use your judgement.
Let's look at BAMBX "Strategy: The fund seeks to achieve its investment objective by investing in a range of global asset classes, with a focus on fixed and floating rate debt securities and equity securities. It will normally invest in both U.S. and non-U.S. securities, including securities of companies located in emerging markets."
AOK: looking below, it's not
https://digital.fidelity.com/prgw/digital/research/quote/dashboard/composition?symbol=AOK
Convertible: I'm posting for about 15 years and I haven't seen much discussion about it. Hybrid security. A convertible bond pays fixed-income interest payments, but can be converted into a predetermined number of common stock shares.
I also would not include preferred stocks
CEFs: they are leverage FI but again not really part of your typical bonds.
RPSIX is OK, but LT I prefer PIMIX which has better performance for YTD, 1-3 years (https://schrts.co/fVnIsDbp)
=========
Observation: several unique MBS funds have shown good momentum in the last several weeks. Even PIMIX is on the run since the previous week.
In my world, I hardly ever use HY,EM bonds because of their higher volatility.
YTD: FAFRX is at 8.5%, not too shabby + lower volatility than HY funds.
PIMIX stat report as of 6/30/2023

I wish someone would leave a card on my 2012 Honda Accord with 83,000 miles ! Air conditioning is blowing hot and cold-thought the problem was solved August 2022. I'll find out tomorrow when I take it to the repair shop !

My ‘18 Hybrid Accord’s resale value temporarily exceeded its earlier new (MSR) purchase price 2-3 years after I bought it (according to Kelly BB). Bit of a shocker. Points to the scarcity of cars during / after the pandemic when most new car lots were bare. Dunno. Haven’t a complaint in the world about the car, but would enjoy a new one with all the latest tech.

Yep, happy days are here again may be the theme song
looking ahead for the bond universe if the inflation + rate hike story is really fading as the numbers show now. Which is the story Pimco was telling in their last outlook.

It’s at least a more level playing field with the 10-Yr. Treasury now in the 4% range compared to a couple years back. Of course, by taking just a little more credit risk you can net a percent or two higher.
d

@chang, I concur. Look like we travelled similar path with most of the funds you mentioned above. We have invested with Yacktman for many years. Consistency I performance over time has been its hallmark, especially during drawdowns. Yes, it is true that Steven Yacktman started working with Don early in his college years before he learned their investment process. It is a rare sight to see that happens in today fast changing world.

I have read so many opinions and projections about the interest rate environment and inflation. I am encouraged that there are signs that inflation might be slowing, which was the goal of aggressive interest rate hikes. On the other hand the Fed reaction to that can be so varied. I have a hard time seeing the Feds doing anything that may encourage inflation to return, so cutting interest rates does not seem likely for awhile. On the other hand the need to continue any aggressive rate hiking seems unnecessary if inflation is slowing, and could lead to a recessionary status. It seems to me that we are in store for some "happy place" where rates need to be more stable for awhile, close to the current level, before the Feds know what is needed next. I expect the rate hike in July, but we may be in a more extended period of nothingness, before the Feds decide what comes next (rate hikes/rate reductions/no changes). Banks are quite willing to offer to sell CDs for 18 month CDs for 5.25%, 2 years for 5.05%, and 3 years at 4.8%, which to me sounds like they expect slightly lower interest rates, but not a major reduction.

The article talks about people lowering their standard of living, canceling gym membership, eating out less, ect. That's how to reduce inflation? By pricing a different basket of goods and services?
That's the way supply and demand works - reduce demand and prices fall. Nothing so nefarious as changing the basket of goods priced from month to month.
Chained CPI is the metric that accounts for substitutions.

In its final form, the [chained] CPI-U is a monthly chained price index with the expenditure weights varying each month. The CPI-U and CPI-W, on the other hand, are biennial chained price indexes where their expenditure weights are updated every two years. Within the two-year span, these indexes are fixed-weight series, where the changes in these indexes reflect only changes in prices, and not expenditure shares, which are held constant.

https://www.bls.gov/cpi/additional-resources/chained-cpi-questions-and-answers.htm#Question_4
FWIW, chained CPI rose 3.4% Y/Y vs. the 3.0% reported for the fixed basket, "regular" CPI.
https://www.bls.gov/news.release/pdf/cpi.pdf (See Table 5.)

For me, Dan Ivascyn is the most crucial for me to understand bonds and what to do. For many years, Dan Ivascyn has been saying the same thing which is "I can still find opportunities in MBS that I like".

Same here. Dan and Richard Clarida, back at Pimco from a stint at the Fed, gave a great presentation of Pimco's latest cyclical outlook a few weeks back.
Another bond asset that's been good lately: EM debt. The dollar-denominated etf I use in that category is up 8.3% ytd. Of course volatility is an issue for EM assets.