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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 the 5 highest yielding Zacks #1 ranked 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.
|Mutual Fund||Sec Yield|
|CNI Charter HIgh Yield Bond Servicing||8.98%|
|Fifth Third High Yield Bond A||7.48%|
|Federated High-Income Bond A||7.40%|
|Touchstone High Yield A||7.29%|
|DWS High Income A||6.83%|
CNI Charter High Yield Bond Servicing (CHYIX) invests the majority of its assets in fixed income securities rated below investment grade. Corporate bonds and debentures, convertible securities, preferred securities, zero coupon obligations and government securities constitute its major investments. This high yield mutual fund returned 5.88% over the last one year period.
The high yield mutual fund has an expense ratio of 1.10% compared to a category average of 1.14%.
Fifth Third High Yield Bond A ( ) seeks a high level of income. The fund invests a large share of its assets in debt securities which provide high yields but are rated below investment grade. It aims to maintain an average maturity period varying from six to ten years for its portfolio. This high yield mutual fund returned 4.75% over the last one year period.
Brendan White is the fund manager and he has managed this high yield mutual fund since 2005.
Federated High-Income Bond A ( FHIIX - MF report ) fund invests heavily in a wide range of high-yield corporate bonds with lower ratings. The fund may also utilize synthetic instruments such as derivatives to fulfill its investment objectives. This high yield mutual fund returned 4.66% over the last one year period.
The high yield mutual fund has a minimum initial investment of $1,500 and an expense ratio of 1.23% compared to a category average of 1.14%.
Touchstone High Yield A ( THYAX - MF report ) seeks significant income with capital growth as a secondary objective. The fund 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 fund returned 5.48% over the last one year period.
As of September 2011, this high yield mutual fund held 182 issues, with 1.59% of its total assets invested in Hca 6.5%.
DWS High Income A ( KHYAX - MF report ) invests at least 65% of its assets in bonds which are rated below the fourth highest credit rating category. A maximum of half of its assets may be utilized to purchase foreign securities. The high yield fund returned 3.92% over the last one year period.
Gary Russel is the fund manager and he has managed this high yield mutual fund since 2006.
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.
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