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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.
Pioneer High Yield A (TAHYX - MF report) invests a large proportion of its assets in high yield securities rated investment grade and preferred stock. The fund may also purchase derivatives with similar economic features. It may also invest in convertible bonds rated investment grade. The high yield mutual fund has a three year annualized return of 16.19%.
Tracy Wright is the fund manager and he has managed this high yield mutual fund since 2007.
Columbia High Yield Opportunity A seeks total returns. A majority of its assets are invested in high yield debt securities issued by domestic and foreign companies including companies from emerging markets. The high yield mutual fund has a three year annualized return of of 15.33%.
The high yield mutual fund has a minimum initial investment of $2,000 and an expense ratio of 1.05% compared to a category average of 1.15%.
Federated High-Income Bond A (FHIIX - MF report) 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. The high yield mutual fund has a three year annualized return of 15.7%.
As of March 2012, this high yield fund held 407 issues, with 1.79% of its total assets invested in Cit Grp 7%.
Invesco High Yield A (AMHYX - MF report) seeks total return. The fund invests the majority of its assets in debt securities rated below investment grade. Up to 25% of its assets may be used to purchase foreign securities and up to 15% may be invested in emerging market securities. The high yield mutual fund has a three year annualized return of 15.7%.
Peter Ehret is the fund manager and he has managed this high yield mutual fund since 2001.
Transamerica High Yield Bond A (IHIYX - MF report) seeks high current income. The fund invests a large share of its assets in bonds with high risk providing high returns. It may also invest in cash, equivalent securities or short term debt instruments. The high yield mutual fund has a three year annualized return of 15.93%.
The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.17% compared to a category average of 1.15%.
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