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Best of Funds

Investors with a reasonably high appetite for risk, in pursuit of significantly high income levels, would do well to consider high yield bonds. This category of fixed-income securities generally represents corporate bonds with low ratings, often below investment grade. A significant amount of risk is therefore associated with these investments and mutual funds are the best option to invest in these instruments. By investing in a well diversified portfolio of such securities they successfully lower the associated risk for the investor.

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, investors can click here to see the complete list of funds.

MEMBERS High Income A (MHNAX - MF report) seeks high current income with a secondary objective of capital growth. The fund utilizes the majority of its assets to purchase high yield fixed-income securities with low ratings. Not more than 25% of its assets may be invested in any one industry. The high yield mutual fund has a five year annualized return of 5.7%.

The high yield mutual fund has a minimum initial investment of $1,00 and an expense ratio of 1.00% compared to a category average of 1.15%.

Waddell & Reed High-Income A (UNHIX - MF report) invests the majority of its assets in a wide range of high yield debt instruments, the risk associated with which is in consonance with the fund’s objective. The fund purchases fixed-income securities without regard to their maturity period. The high yield mutual fund has a five year annualized return of 6.46%.

William M. Nelson is the fund manager and he has managed this high yield mutual fund since 2008.

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. The high yield mutual fund has a five year annualized return of 7.19%.

The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.99% compared to a category average of 1.15%.

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. The high yield mutual fund has a five year annualized return of 6.11%.

As of December 2011, this high yield mutual fund held 366 issues, with 1.74% of its total assets invested in Bank of America Mortgage.

Federated High-Income Bond A (FHIIX - MF report) seeks current income. The fund invests heavily in a wide range of high-yield corporate bonds with lower ratings. The high yield mutual fund has a five year annualized return of 6.76%.

Mark E. Durbiano is the fund manager and he has managed this high yield mutual fund since 1987.

To view the Zacks Rank and past performance of all high yield mutual funds, investors can click here to see the complete list of funds.

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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