For the average investor, high yield mutual funds are the best method to invest in bonds rated below investment grade, popularly known as junk bonds. This is because these funds hold a wide range of such securities, significantly reducing portfolio risk. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, because the yield from such bonds is higher than investment grade securities, these investments are less susceptible to interest rate fluctuations.
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, investors can click here to see the complete list of funds.
Sec 30 Day Yield
Northern High Yield Fixed Income
Guggenheim High Yield A
Delaware High-Yield Opportunities A
Waddell & Reed High-Income A
Northeast Investors ( NTHEX) focuses on investing in marketable securities of prominent firms. It primarily purchases debt securities rated below investment grade by any of the two major ratings firms. This high yield mutual fund returned 14.69% over the last one year period.
The high yield mutual fund has an expense ratio of 1.00% compared to a category average of 1.13%.
Northern High Yield Fixed Income (NHFIX) seeks high current income. The fund invests a large proportion of its assets in corporate bonds rated below investment-grade and other fixed-income securities. The fund focuses on purchasing domestic debt securities but may also invest in foreign debt instruments. This high yield mutual fund returned 14.11% over the last one year period.
Richard J. Inzunza is the fund manager and he has managed this high yield mutual fund since 2007.
Guggenheim High Yield A (SIHAX) invests the majority of its assets in a wide range of debt securities with high risk and providing high returns. These securities should not be among the top four long-term rating categories as designated by a Nationally Recognized Statistical Rating Organization (:NRSRO). The high yield mutual fund returned 15.02% over the last one year period.
As of March 2013, this high yield mutual fund held 156 issues, with 3.99% of its total assets invested in Nelnet Inc Callable Bond.
Delaware High-Yield Opportunities A (DHOAX) seeks total return. The fund invests in bonds providing high return with ratings equal to or below “BBB”. It may invest in both domestic and foreign securities issued by governments as well as in foreign corporate bonds. This high yield mutual fund returned 14.36% over the last one year period.
The high yield mutual fund has an expense ratio of 1.11% compared to a category average of 1.13%.
Waddell & Reed High-Income A (UNHIX) invests in a wide range of fixed income securities which provide high yields but carry high risk. The fund invests in securities without regard to their maturity periods. It may invest without limit in junk bonds. This high yield mutual fund returned 16.79% over the last one year period.
William M. Nelson is the fund manager and he has managed this high yield mutual fund since 2008.
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.
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