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Mutual Fund Commentary

Investing in high yield securities needs an above average appetite for risk as the probability of default is the highest in these securities. These lower rated securities carry high coupon yields to compensate investors for the associated risk. However, they can maximize total returns by generating high interest income and capital appreciation over the long term. Mutual funds investing in these securities significantly reduce the associated risk through diversification and should be a part of the portfolio of every investor looking at maximum returns.

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.

Invesco High Yield A (AMHYX - MF report) seeks total return. The fund invests a majority of its assets in debt instruments rated below investment grade. A maximum of 25% of its assets are utilized to purchase foreign securities. Not more than 15% may be invested in emerging markets. This high yield mutual fund returned 14.75% 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%.

John Hancock Funds2 High Yield 1 (JIHDX - MF report) invests a large share of its assets in high yield securities. The fund may invest in foreign bonds as well as fixed and floating rate loans. The average maturity period of its portfolio ranges from three to seven years. This high yield mutual fund returned 16.46% over the last one year period.

Stephen A. Walsh is the fund manager and he has managed this high yield mutual fund since 2006.

Waddell & Reed High-Income A (UNHIX - MF report) seeks high current income and capital growth. The fund purchases a wide range of debt securities of relatively lower quality. It may invest without limit in junk bonds. This high yield mutual fund returned 18.35% over the last one year period.

As of September 2012, this high yield mutual fund held 243 issues, with 2.06% of its total assets invested in Laureate Educ 144A 9.2.5%.

MainStay High Yield Opportunities A (MYHAX - MF report) invests a majority of its assets in high yield domestic and foreign high yield fixed income instruments. These may be rated below investment grade or of comparable quality. The high yield mutual fund returned 15.82% over the last one year period.

The high yield mutual fund has an expense ratio of 1.28% compared to a category average of 1.13%.

Loomis Sayles High Income A (NEFHX - MF report) seeks high total return. The fund predominantly invests a minimum of 65% of its assets in securities rated below investment grade. Not more than one-fifth of its assets can be invested in non-dollar denominated foreign securities. This high yield mutual fund returned 17.77% over the last one year period.

Elaine M. Stokes is the fund manager and he has managed this high yield mutual fund since 2007.

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.

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