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Mutual Fund Commentary

High yield securities are the preferred option for investors who have a reasonable appetite for risk and who are willing to forgo equity growth for current income. This category of securities comprise of corporate bonds of low quality, convertible securities and preferred stock, all of which carry a significant amount of risk. Mutual funds are a prudent method to invest in this class of funds as they significantly reduce the risk involved by holding a well diversified portfolio. Such funds may also seek capital appreciation as a secondary objective.

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.

Federated High-Yield (FHYTX - MF report) seeks high current income. The fund invests in a wide range of high yield domestic corporate bonds with low ratings. It may also invest in convertible instruments and exchange traded funds. The high yield mutual fund returned 5.86% over the last one year period.

The high yield mutual fund has an expense ratio of 0.99% compared to a category average of 1.16%.

Northern High Yield Fixed Income (NHFIX - MF report) invests a large proportion of its assets in corporate bonds rated below investment-grade and other fixed-income securities. The fund focuses on purchasing domestic debt securities but may also invest in foreign debt instruments. This high yield mutual fund returned 5.79% over the last one year period.

Richard J. Inzunza is the fund manager and he has managed this high yield mutual fund since 2007.

Rydex High Yield Strategy A (RYHDX - MF report) seeks to provide returns that mimic the performance of the high yield bond market. The fund predominantly invests in high yield bonds similar to those in the U.S and Canadian high yield bond market. This high yield mutual fund returned 6.94% over the last one year period.

The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.54% compared to a category average of 1.16%.

Legg Mason Western Asset High Yield Bond A (SAHYX - MF report) invests the majority of its assets in high yield bonds and related securities. Up to 35% of its assets may also be utilized to purchase sovereign debt issued by governments from emerging markets. This high yield mutual fund returned 3.65% over the last one year period.

As of March 2012, this high yield fund held 422 issues, with 2.24% of its total assets invested in Republic of Venezuela 5.75%.

Thrivent High Yield Fund A (LBHYX - MF report) seeks current income. The fund invests heavily in a wide range of high-yield debt securities with ratings equal to or below “BB” as per S&P or ‘Ba” as per Moody’s. This high yield mutual fund returned 6.32% over the last one year period.

Paul Ocenasek is the fund manager and he has managed this high yield mutual fund since 1997.

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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