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Top 5 Highest Yielding Bond Mutual Funds

Zacks Investment Research

Investors willing to undertake a reasonable amount of risk in pursuit of high income levels would do well to consider high yield bonds. This category generally represents corporate bonds with low ratings, often below investment grade. A significant amount of risk is therefore associated with these investments and mutual funds are the best option to invest in these instruments. By investing in a well diversified portfolio of such securities they successfully lower the associated risk for the investor.

Below we will share with you the 5 highest yielding Zacks #1 ranked 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, then click here.

Mutual Fund SEC Yield
Federated High Income Bond A 7.55%
Rydex High Yield Strategy A 6.68%
Value Line Aggressive Income A 6.24%
Vanguard HIgh-Yield Corporate 5.9%
T. Rowe Price High-Yield 5.88%

 Federated High-Income Bond A (NASDAQ:FHIIX - News) (click here to view this funds's analyst report) seeks current income. The fund invests heavily in a wide range of high-yield corporate bonds with lower ratings. The fund may also utilize synthetic instruments such as derivatives to fulfill its investment objectives. This high yield mutual fund returned 5.44% over the last one year period.

Mark E. Durbiano is the fund manager and he has managed this high yield mutual fund since 1987.

Rydex High Yield Strategy A (NASDAQ:RYHDX - News) (click here to view this funds's analyst report) invests in high yield debt securities. The fund may also invest in securities which as a whole mimic the performance of the U.S and Canadian high yield bond markets. The high yield mutual fund has a three year annualized return of 11.42%.

The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.54% compared to a category average of 1.14%.

Value Line Aggressive Income (NASDAQ:VAGIX - News) (click here to view this fund's analyst report) seeks to maximize current income. The fund invests a large share of its assets in fixed income corporate securities which provide high yields but have comparatively low ratings. Such instruments are also known as junk bonds. This high yield mutual fund returned 4.37% over the last one year period.

Jeffrey Geffen is the fund manager and he has managed this high yield mutual fund since 2010.

Vanguard High-Yield Corporate (NASDAQ:VWEHX - News) (click here to view this fund's analyst report) invests the majority of its assets in corporate bonds assigned the lowest investment grade rating by a renowned bond rating agency. Up to 20% of its assets may be utilized to hold securities rated below investment grade. The high yield mutual fund has a five year annualized return of 6.5%.

As of September 2011, this high yield mutual fund held 353 issues, with 1.28% of its total assets invested in Cit Grp 7%.

T. Rowe Price High-Yield (NASDAQ:PRHYX - News) (click here to view this fund's analyst report) seeks high current income. The fund invests a large proportion of its assets in a wide range of high yield corporate bonds, preferred stocks and convertible securities. The weighted average maturity period of the fund’s portfolio ranges form five to ten years. The high yield mutual fund has a ten year annualized return of 8.08%.

The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.74% compared to a category average of 1.14%.

To view the Zacks Rank and past performance of all high yield mutual funds, then click here.

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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