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.
Nuveen High Yield Bond A utilizes the majority of its assets to purchase domestic and foreign corporate debt. These securities are typically of the high yield variety, rated below investment grade or with similar characteristics. This high yield mutual fund returned 13.48% over the last one year period.
Andrew John Stenwallis is the fund manager and he has managed this high yield mutual fund since 2004.
Columbia High Yield Bond A (INEAX - MF report) seeks high current income. The majority of the fund’s assets are utilized to purchase debt securities rated below investment grade. Not more than 25% of its assets are invested in foreign high-yield debt instruments. The high yield mutual fund has a three year annualized return of 7.93%.
As of July 2011, this high yield mutual fund held 297 issues, with 4.82% of its total assets invested in Columbia Short-Term Cash.
Delaware High-Yield Opportunities A (DHOAX - MF report) 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. This high yield mutual fund returned 14.11% over the last one year period.
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%.
John Hancock2 High Yield 1 (JIHDX) seeks high total return. It invests the majority of its assets in corporate bonds, preferred stocks, government and asset backed securities. It may purchase foreign bonds as well as fixed-income securities denominated in foreign currencies. The high yield mutual fund has a five year annualized return of 8.65%.
Stephen A. Walsh is the fund manager and he has managed this high yield mutual fund since 2006.
Touchstone High Yield A (THYAX - MF report) invests a large proportion of its assets in debt securities rated below investment grade. The fund focuses on acquiring high yield securities issued by companies from the U.S. The high yield mutual fund has a ten year annualized return of 7.74%.
The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.05% compared to a category average of 1.16%.
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.