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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 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.
Consulting Group High Yield Investments (THYUX - MF report) invests the majority of its assets in domestic fixed income instruments which generate high income and have relatively lower ratings. A maximum of 20% of its assets may be used to purchase equity securities. This high yield mutual fund returned 15.14% over the last one year period.
Stephen A. Walsh is the fund manager and he has managed this high yield mutual fund since 2001.
Western Asset Global High Yield Bond A (SAHYX - MF report) seeks higher total return. It invests heavily in high yield bonds with relatively lower ratings. It may invest in both domestic and foreign securities and also in instruments backed by foreign governments. A maximum of 35% of its assets may be invested in sovereign debt instruments from emerging markets. This high yield mutual fund returned 14.86% over the last one year period.
As of September 2012, this high yield mutual fund held 419 issues, with 1.97% of its total assets invested in Mexico (Utd Mex St) 6.5%.
Delaware High-Yield Opportunities A (DHOAX - MF report) invests in bonds providing high return with ratings equal to or below “BBB”. It may utilize its assets to purchase both domestic and foreign securities issued by governments as well as in foreign corporate bonds. This high yield mutual fund returned 14.82% over the last one year period.
The high yield mutual fund has an expense ratio of 1.11% compared to a category average of 1.13%.
Transamerica High Yield Bond A (IHIYX - MF report) seeks high current income. It invests heavily in bonds with high risk providing high returns. It may also invest in cash, equivalent securities or short term debt instruments. This high yield mutual fund returned 14.56% over the last one year period.
Bradley Beman is the fund manager and he has managed this high yield mutual fund since 1998.
Invesco High Yield A (AMHYX - MF report) invests the majority of its assets in debt instruments rated below investment grade. Not more than 25% of its assets may be used to purchase foreign securities and a maximum of 15% may be invested in emerging market securities. This high yield mutual fund returned 14.19% over the last one year period.
The high yield mutual fund has an expense ratio of 0.90% compared to a category average of 1.13%.
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.