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, then click here.

American Century High-Yield ( ABHIX - MF report ) seeks high current income with a secondary objective of capital appreciation. At least 80% of its assets are used to purchase high yield corporate bonds, and income generating convertible and preferred securities. The high yield mutual fund has a three year annualized return of 6.63%.

Mike Difley is the fund manager and she has managed this high yield fund since 1997.

Vanguard High-Yield Corporate ( VWEHX - MF report ) 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. This high yield mutual fund returned 17.57% over the last one year period.

The high yield mutual fund has a minimum initial investment of $3,000 and an expense ratio of 0.28% compared to a category average of 1.20%.

Fidelity Focused High Income ( FHIFX - MF report ) seeks high current income. The fund primarily invests in income generating debt securities. It 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 5.36%.

As of July 2010, this high yield mutual fund held 199 issues, with 7.80% of its total assets invested in Fidelity Revere Str Tr.

Pioneer High Yield A ( TAHYX - MF report ) invests a large proportion of its assets in high yield securities rated investment grade and preferred stock. The fund may also acquire securities of lower quality including those issued by companies in default or declared bankrupt at the time of purchase. No more than 20% of its assets may be invested in floating rate instruments. The high yield mutual fund returned 17.42% in the last one year period.

Tracy Wright is the fund manager andshe has managed this high yield mutual fund since 2007.

Principal High Yield A ( CPHYX - MF report ) primarily seeks to generate substantial current income. The fund focuses on purchasing high yield debt securities rated below investment grade, including foreign securities. The high yield mutual fund has a ten year annualized return of 7.98%.

The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.95% compared to a category average of 1.20%.

To view the Zacks Rank and past performance of all high yield mutual 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/