(MONEY Magazine) – Stocks have plummeted, a recession looms, terrorist threats abound and President Bush is readying the troops for a ground war. Yes, it's 1990 all over again.

Well, almost. In 1990, the collapse of high-yield bonds (corporate bonds rated BB or below by the bond-rating agencies) was the dominant story of the financial markets. Remember the savings and loan scandals? The furor surrounding junk bond financier Michael Milken? The frenzied search to see which guaranteed investment contracts (GICs) were backed by high-yield bonds? Well, if you don't, the nation's insurance companies certainly do. Thanks to the panic induced by their "secret" junk bond holdings, the insurance companies relinquished their grip on the nation's 401(k) business. Their rivals in the mutual fund industry never looked back.

These days, in contrast, high-yield bonds are operating in a virtual media blackout. Hogging the spotlight instead are the glamour babies of the late 1990s--day-traders, Internet companies, venture-capital firms and other erstwhile Silicon Valley legends. Today's rise-and-fall sagas detail the fortunes of the dotcom millionaires who failed to cash in their stock options, not the opulent parties of swaggering junk bond magnates.

Don't let the silence fool you. Although nobody may be listening, rest assured; the high-yield tree did fall. Take a look at the chart below. At their worst during George I's presidency, high-yield bond prices had collapsed to the point that the typical junk bond was yielding about nine percentage points more than a 10-year Treasury bond. (High-yield bonds were paying about 17%, while Treasuries yielded 8%.) In 2001, under George II, the margin is nearly the same.

Which then leads to the logical follow-up: If today looks like 1990, will tomorrow look like '91 through '93? Greed compels the thought. During that short stretch, the total return on high-yield bonds exceeded 100%. You don't get many chances to double your money in three years using bonds.

I believe that now is one of those rare opportunities. Yes, it's true, the sector has recently issued two woefully false alarms. In 1998, after the Asian crisis, a temporary drop in high-yield bond prices led many observers--including yours truly--to predict happy days for 1999. Wrong. Blame an overheating economy that boosted interest rates and depressed returns on bonds of all stripes. Then, at the end of 2000, Fed chairman Alan Greenspan sent high-yield bonds plummeting with his gloomy comments about the outlook for the economy. It seemed like a golden opportunity to buy low and sell high--until Sept. 11 intruded.

The third time should prove the charm. Sure, war means uncertainty, and another wave of terrorist attacks wouldn't be healthy for junk bonds. But unless these attacks cause the Son of the Great Depression, such price declines will be only temporary. Because, as financial adviser Bill Bernstein points out, high-yield bonds are naturally buoyant. Thanks to their fixed maturity dates, downtrodden junk bonds--unlike languishing stocks--are mathematically guaranteed to generate profits, assuming that they avoid default. That is, a bond with a price of $80, a coupon of 10% and a maturity date of 2006 not only yields 12.5% today (10% divided by 80 equals 12.5%) but will inevitably grow in price to $100 if the company manages to stay in business. Ti-i-i-ime, as Mick Jagger would say, is on the junk investors' side.

Also inevitable, though, is the failure of some companies that issue junk bonds. So diversification is critical. For most investors, the best way to diversify is to own a high-yield fund. Even there, though, you have to choose carefully. In 1990, Mike Milken may have monopolized the trading of junk bonds, but the securities themselves represented a wide variety of industries: casinos, airlines, tobacco manufacturers, paper processors--the entire spectrum of the U.S. economy. Such diversity protected bondholders from getting bushwacked by an industry-specific problem. These days, sadly, the high-yield market is glutted with a surfeit of telecommunications issues--meaning that if you're not careful, you could buy a high-yield mutual fund and learn that 40% of its assets are exposed to a single economic sector. No, thanks.

For that reason, my favorite junk mutual funds consist exclusively of selections that are light in telecommunications. They are also relatively conservative funds, so they may lag some of their bolder rivals during the upcoming rally. But don't be greedy! In the high-yield marketplace, avarice is rarely rewarded.

The obvious choice for aspiring junk buyers is Northeast Investors fund (800-225-6704). It has one of the best records of any high-yield fund over the past 15 years, veteran management, a pure no-load format, a low 0.61% annual expense ratio and a highly accessible $1,000 minimum initial investment. Oh, and did I mention that it is light on the telecom bonds?

There are some other good choices. At 17 years of age, T. Rowe Price High-Yield (800-638-5660) is still notching above-average results. Manager Mark Vasilkev is very careful about limiting his investments in any single sector. Recently, he has cut back on telecom in favor of older-economy securities.

For those with particularly staid tastes, Vanguard and Columbia offer funds that are split about evenly between the staples of the high-yield business, B-rated securities, and those bonds rated BB or even BBB. The two funds are midway in credit quality--and in risk--between a true junk fund and a high-grade corporate fund.

Whatever your choice, please think of these funds as containing total-return possibilities, not high-paying bonds. Don't rely on junk for your monthly income checks! Neither will you want to own high-yield funds in a taxable account; indeed, of all investments in the world, junk is possibly the least tax-efficient. As a tax-sheltered alternative to common stocks, however, this particular four-letter word carries unusual appeal.