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 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.
Federated High-Yield (FHYTX) seeks high current income. The fund invests in a wide range of high yield domestic corporate bonds with low ratings. It may also invest in convertible instruments in consonance with its investment strategy. The high yield mutual fund returned 1.62% over the last one year period.
The high yield mutual fund has an expense ratio of 0.99% compared to a category average of 1.15%.
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 4.62% over the last one year period.
Sean M. Feeley 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 4.32% over the last one year period.
As of April 2012, this high yield mutual fund held 261 issues, with 1.14% of its total assets invested in Sprint Nextel 144A 9.125%.
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 5.63% 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 1.15%.
Fidelity Focused High Income (FHIFX) seeks high income. The fund primarily invests in income generating debt securities, focusing on those of lower quality. The fund may invest in securities which do not yield income, such as common stocks. The high yield mutual fund has a five year annualized return of 5.13%.
Matt Conti is the fund manager and he has managed this high yield mutual fund since 2004.
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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