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 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
Waddell & Reed High-Income
Legg Mason Western Asset High Yield Bond A
Virtus High Yield A
Northern High Yield Fixed Income
Lord Abbett High Yield A
Waddell & Reed High-Income A (UNHIX) seeks total return. The fund invests a large share of its assets in a wide range of high yield debt instruments, the risk associated with which is in consonance with the fund’s objective. This high yield mutual fund returned 21.79% over the last one year period.
The high yield mutual fund has a minimum initial investment of $500 and an expense ratio of 1.08% compared to a category average of 1.12%.
Western Asset Global High Yield Bond A (SAHYX) invests the majority of its assets in high yield bonds and related securities. Up to 35% of its assets may also be utilized to purchase sovereign debt issued by governments from emerging markets. This high yield mutual fund returned 19.32% over the last one year period.
S. C. Leech is the fund manager and he has managed this high yield mutual fund since 2006.
Delaware Pooled High-Yield Bond (DPHYX) seeks high total return. The fund focuses on investing in bonds rated investment grade by S&P or other nationally recognized statistical rating organizations. This high yield mutual fund returned 22.18% over the last one year period.
The high yield mutual fund has an expense ratio of 0.59% compared to a category average of 1.12%.
Northern High Yield Fixed Income (NHFIX) 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 18.41% over the last one year period.
As of September 2012, this high yield mutual fund held 72 issues, with 0.75% of its total assets invested in Amerigroup 7.5%.
Lord Abbett High Yield A (LHYAX) seeks high current income and the prospect for capital growth. The fund invests the majority of its assets in junk bonds, including those issued by companies and convertible securities. Not more than 20% of its assets are utilized to purchase foreign securities. This high yield mutual fund returned 18.88% over the last one year period.
Steven F. Rocco is the fund manager and he has managed this high yield mutual fund since 2010.
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.
More From Zacks.com