With interest rates staying extremely low, investors are flocking to high yield and dividend equity mutual funds. The Boston Globe contrasts the way the yield-chasing trend is being handled Charles Schwab [profile] and Fidelity [profile] on the one side and Vanguard [profile] on the other.

Fido and Schwab both went with the $36.8 billion that, as of August 31, flowed into junk bond and high-dividend mutual funds this year. The Boston Behemoth launched four new mutual funds and the San Francisco-based brokerage giant launched one regular mutual fund and two ETFs. The funds are: the Fidelity Conservative Income Bond Fund, the Fidelity Global Bond Fund, the Fidelity International Bond Fund, the Fidelity Global Equity Income Fund, the Laudus Mondrian Global Fixed Income Fund, the Schwab U.S. Aggregate Bond Fund ETF and the Schwab U.S. Dividend Equity ETF.

On the flip side, in May the Vanguard crew closed their junk bond fund to most new investors after $2 billion in net inflows over six months. The Malvern, Pennsylvania-based low cost mutual fund giant's Chris Philips said the move was meant as "a red flag to investors" to beware the risks of higher yield, as well as a response to subadvisor Wellington Management [profile] "finding it difficult to put cash to work."

Schwab's John Sturiale, Fidelity equity group president Brian Hogan and Morningstar senior fund analyst Laura Lallos all weighed in for the article. 

Edited by: Neil Anderson, Managing Editor


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