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High yield securities are an excellent choice for investors who are not risk averse and who seek current income rather than equity growth. Such securities include corporate bonds with lower credit ratings, convertible securities and preferred stock, all of which carry a significant amount of risk. Mutual funds are the best way to invest in this category as they reduce the risk involved by holding a well diversified portfolio. They may also provide capital growth as a secondary objective and aid portfolio diversification.
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.
Catalyst/SMH High Income A ( HIIFX - MF report ) invests primarily in high-yield corporate bonds, as well as in convertible and asset backed securities. It may invest heavily in securities rated below investment grade and those which have defaulted. The high yield mutual fund is non-diversified and returned 19.66% over the last one year period.
Dwayne A. Moyers is the fund manager and has managed this high yield mutual fund since 2008.
USAA High-Yield Opportunities (USHYX) seeks high current income with a secondary objective of capital appreciation. At least 80% of its assets are used to purchase high yield securities such as bonds, convertible securities and preferred stocks. The high yield mutual fund has a three year annualized return of 6.91%.
As of July 2010, this high yield mutual fund held 459 issues, with 5.14% of its total assets invested in iShares iBoxx $ High Yield Corporate Bd.
MainStay High Yield Opportunities A ( MYHAX - MF report ) invests the majority of its assets in high yield corporate debt, including domestic and foreign securities rated below investment-grade. It holds long positions proportionate to 140% of net assets and short positions equal to 40% of net assets. The high yield mutual fund returned 19.22% over the last one year period.
The high yield mutual fund has an expense ratio of 1.29% compared to a category average of 1.20%.
American Funds American High-Income Trust A (AHITX) seeks high levels of current income. The fund 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 high yield mutual fund has a five year annualized return of 5.36%.
David D. Barclay is the fund manager and has managed this high yield mutual fund since 1989.
Delaware High-Yield Opportunities A (DHOAX) 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. The high yield mutual fund has a ten year annualized return of 6.91%.
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 1.20%.
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/
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