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Mutual Fund Commentary

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.

Western Asset Global High Yield Bond A (SAHYX - MF report) invests the majority of its assets 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 16.56% over the last one year period.

S. C. Leech is the fund manager and he has managed this high yield mutual fund since 2006.

Guggenheim High Yield A (SIHAX - MF report) seeks high current income. The fund invests the majority of its assets in a wide range of debt securities with high risk and providing high returns. These securities should not be among the top four long-term rating categories as designated by a Nationally Recognized Statistical Rating Organization (NRSRO). The high yield mutual fund returned 14.37% over the last one year period.

As of January 2013, this high yield mutual fund held 146 issues, with 4.86% of its total assets invested in Nelnet Inc, 7.4% - 2036.

MassMutual Premier High Yield A (MPHAX - MF report) invests heavily in fixed income instruments with relatively lower ratings. A maximum of 20% of its assets may be invested in bank loans. This high yield mutual fund returned 15.49% over the last one year period.

The high yield mutual fund has an expense ratio of 1.15% compared to a category average of 1.14%.

Delaware Pooled High-Yield Bond (DPHYX - MF report) seeks high total return. The fund focuses on investing in bonds rated investment grade by S&P or other nationally recognized statistical rating organizations. This high yield mutual fund returned 15.22% over the last one year period.

Thomas H. Chow is the fund manager and he has managed this high yield mutual fund since 2012.

Virtus High-Yield A (PHCHX - MF report) invests the majority of its assets in fixed income instruments which generate high yields. The maturity period of the fund is identical to that of its benchmark the Barclay’s Capital U.S. High Yield 2% Issuer Capped Index. This high yield mutual fund returned 14.23% over the last one year period.

The high yield mutual fund has an expense ratio of 1.15% compared to a category average of 1.14%.

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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