Investing in high yield securities needs an above average appetite for risk as the probability of default is the highest in these securities. These lower rated securities carry high coupon yields to compensate investors for the associated risk. However, they can maximize total returns by generating high interest income and capital appreciation over the long term. Mutual funds investing in these securities significantly reduce the associated risk through diversification and should be a part of the portfolio of every investor looking at maximum returns.
Below we will share with you 5 top rated high yield mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all high yield funds, investors can click here to see the complete list of funds.
Virtus High-Yield A (PHCHX) fund invests the majority of its assets in fixed income instruments which generate high yields. The maturity period of the fund is identical to that of its benchmark the Barclay’s Capital U.S. High Yield 2% Issuer Capped Index. The high yield mutual fund returned 7.78% over the last one year period.
Kyle A. Jennings is the fund manager and he has managed this high yield mutual fund since 2011.
Columbia High Yield Bond A (INEAX) seeks high current income. A large share of the fund’s assets is utilized to purchase debt securities rated below investment grade. Not more than 25% of its assets are utilized to purchase foreign high-yield debt securities. This high yield mutual fund returned 8.41% over the last one year period.
The high yield mutual fund has a minimum initial investment of $2,000 and an expense ratio of 1.06% compared to a category average of 1.13%.
MassMutual Premier High Yield A (MPHAX) invests the majority of its assets in domestic fixed income securities with relatively lower ratings. These include corporate bonds, asset backed instruments and securities issued by the U.S. government or its agencies. This high yield mutual fund returned 8.54% over the last one year period.
Scott D. Roth is the fund manager and he has managed this high yield mutual fund since 2010.
Thrivent High Yield Fund A (LBHYX) seeks high current income. The fund invests a large share of its assets in a wide range of high-yield debt securities with ratings equal to or below “BB” as per S&P or ‘Ba” as per Moody’s. It may also purchase notes, debentures and preferred stocks. This high yield mutual fund returned 8.44% over the last one year period.
As of May 2012, this high yield mutual fund held 265 issues, with 1.13% of its total assets invested in Sprint Nextel 144A 9%.
Vanguard High-Yield Corporate (VWEHX) invests the majority of its assets in a wide range of corporate bonds which are rated medium or low in terms of credit quality. These bonds usually have medium or short term maturity periods. This high yield mutual fund returned 9.54% over the last one year period.
The high yield mutual fund has a minimum initial investment of $3,000 and an expense ratio of 0.23% compared to a category average of 1.13%.
To view the Zacks Rank and past performance of all high yield mutual funds, investors can click here to see the complete list of funds.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.
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