Investors should not aggressively chase high yields in places like emerging market fixed income funds or junk bonds because they could lose big on the principal, said Collin Martin, Director of Fixed Income Strategy at the Schwab Center for Financial Research. Martin added that high yield bonds have an important place in a portfolio, but investors should remember that they have a high correlation to equities. He said municipal bonds are attractive now because the states and municipalities are improving their balance sheets. Finally, Martin said he is most bullish on intermediate term bonds at this point.
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