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Zacks#1 Ranked High Yield Mutual Funds

Zacks Investment Research

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.

Delaware High-Yield Opportunities A (DHOAX) invests a large proportion of its assets in corporate bonds rated below investment-grade by renowned ratings firms such as Standard & Poors. The fund may also purchase unrated securities of similar quality. The high yield mutual fund has a five year annualized return of 6.63%.

The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.11% compared to a category average of 1.16%.

American Century High-Yield (ABHIX) seeks high current income with a secondary objective of capital appreciation. The fund utilizes the majority of its assets to purchase high yield corporate bonds and income generating convertible and preferred securities. The high yield mutual fund has a five year annualized return of 6.78%.

G. David MacEwen is the fund manager and he has managed this high yield mutual fund since 2008.

Waddell & Reed High-Income A (UNHIX) invests the majority 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. The fund purchases fixed-income securities without regard to their maturity period. The high yield mutual fund has a five year annualized return of 7.27%.

As of December 2011, this high yield mutual fund held 209 issues, with 2.29% of its total assets invested in Laureate Educ 144A 10.25%.

 T. Rowe Price High-Yield (PRHYX) 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 high yield mutual fund has a five year annualized return of 7.08%.

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 1.16%.

Vanguard High-Yield Corporate (VWEHX) 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 6.66%.

Michael L. Hong 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 at http://www.zacks.com/funds

Read the analyst report on DHOAX

Read the analyst report on ABHIX

Read the analyst report on UNHIX

Read the analyst report on PRHYX

Read the analyst report on VWEHX

Zacks Investment Research



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