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For investors willing to take on a reasonable amount of risk in pursuit of high levels of income, high yield bonds could be an excellent choice. Corporate bonds rated comparatively lower, generally below investment grade make up the largest portion of its investments. Mutual funds are the best option to invest in these instruments since a significant amount of risk is associated with these investments. By holding a well diversified portfolio of such securities, these funds successfully lower risk levels for the investor.
Below we will share with you 5 top rated high yield funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all high yield funds, then click here.
American Funds American High-Income Trust A (AHITX) invests heavily in comparatively lower rated high-yield debt securities. It focuses on purchasing securities rated at the lowest possible investment grade as well as those rated lower. The fund has a five year annualized return of 5.78%.
The fund has an expense ratio of 0.79% compared to a category average of 1.21%.
Northeast Investors ( NTHEX - MF report ) primarily seeks to generate income. It focuses on purchasing debt securities rated below investment grade by a premier rating agency or similar unrated securities. The fund looks to acquire marketable securities with them potential to deliver strong capital growth. The fund has a ten year annualized return of 7.12%.
Ernest E. Monrad is the fund manager and he has managed this high yield fund since 1960.
AIM High Yield A ( AMHYX - MF report ) invests at least 80% of its assets in debt securities rated below investment grade. Up to 25% of its assets may be used to purchase foreign securities and up to 15% may be invested in emerging market securities. The fund returned 42.15% in the last one year period and has a three year annualized return of 5.83%.
As of March 2010, this high yield fund held 321 issues, with 1.30% of its total assets invested in Nielsen Finance LLC.
Transamerica Partners High Yield Bond ( DVHYX - MF report ) seeks high current income. It invests in preferred stocks and high yield debt securities. The majority of its assets are used to purchase junk bonds and related securities. It utilizes an underlying mutual fund with similar investment objectives to invest in these securities. It is a no-load fund.
The high yield fund has a ten year annualized return of 7.12%.
Delaware High-Yield Opportunities A ( DHOAX - MF report ) invests the majority 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. It may also invest in domestic and foreign government securities. This high yield fund returned 39.66% over the last one year period.
The high yield fund has a minimum initial investment of $1,000 and an expense ratio of 1.15% compared to a category average of 1.21%.
To view the Zacks Rank and past performance of all high yield 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/mutualfund/
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