What the experts say

The case for junk bonds

High-yield corporate bonds might seem a scary place to invest just now, said Jeffrey R. Kosnett in Kiplinger’s Personal Finance. That’s why they deserve a second look. “The time to pounce on any beaten-down investment is when the news is still lousy but no longer terrifying.” Although junk bonds are risky, “they’re not nearly as dangerous as stocks.” On average, junk bonds lost only half as much as stocks last year. To minimize risk, stick with funds, and ones that don’t venture too high up the yield curve; too much yield means too much risk. That said, most of the default risk for the near future is concentrated in a few areas—retailing, home building, and auto parts. “Most intelligent fund managers know this and have already shed bonds from these sectors.” Two good no-load funds are SSgA High Yield Bond and Payden High Income.

Tax help for procrastinators

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If you’re still a long way from doing your taxes, consider a backup plan, said Bill Bischoff in SmartMoney. “The paperwork for filing an extension is simple, and it will keep the feds off your back all the way until Oct. 15, 2009.” But a delay in paying your taxes isn’t a complete reprieve. Before April, you’ll still need to estimate your total tax bill for 2008, calculate exactly how much you’ve already paid, and pay what you think you owe. Be realistic: If your estimate turns out to be less than you actually owe, you’ll eventually have to pay interest on the balance, and Uncle Sam can tack on additional penalties for larger discrepancies. “For some folks, once you’ve completed the exercise of coming up with an estimate, you might as well just go ahead and file your taxes.”

Why homeowners walk away

Giving a house back to the bank should be a last resort, said Ron Lieber in The New York Times. But the consequences of mailing in the keys actually aren’t as severe as they were just a few years ago. In the worst-case scenario, a lender will sue the homeowners for what’s still owed. Yet some states prohibit lenders from going after down-and-out borrowers, so many lenders don’t bother. Such “forgiven” debt is typically considered taxable income—a big hit that most homeowners can’t afford to incur—but recent federal legislation has waived taxes on uncollected debt tied to a primary mortgage. So the only lasting “black mark” is on the homeowner’s credit rating: “A short sale, deed in lieu, or foreclosure itself will almost certainly damage” credit scores, for as long as seven years. Many strapped homeowners have decided to take that risk.