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.
Guggenheim High Yield A (SIHAX - MF report) 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 11.83% over the last one year period.
David G. Toussaint is the fund manager and he has managed this high yield mutual fund since 2000.
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 11.06% over the last one year period.
As of June 2013, this high yield mutual fund held 274 issues, with 1.07% of its total assets invested in Chrysler Grp Llc/Cg Co-Iss 8.25%.
Waddell & Reed High-Income A (UNHIX - MF report) invests a majority of its assets in a wide range of debt securities of relatively lower quality. The fund may also invest in fixed income securities irrespective of its maturity period and in any company regardless of its market cap. This high yield mutual fund returned 13.78% over the last one year period.
The high yield mutual fund has an expense ratio of 1.07% compared to a category average of 1.12%.
John Hancock Funds2 High Yield 1 (JIHDX - MF report) seeks more than average return over a market cycle along with equitable risk. The fund invests a large share of its assets in high yield instruments. 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 12.33% over the last one year period.
Stephen A. Walsh is the fund manager and he has managed this high yield mutual fund since 2006.
MassMutual Premier High Yield A (MPHAX - MF report) invests heavily in fixed income instruments with relatively lower ratings. The tenure of the weighted average portfolio is usually between four to ten years. This high yield mutual fund returned 12.56% over the last one year period.
The high yield mutual fund has an expense ratio of 1.15% compared to a category average of 1.12%.
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 https://www.zacks.com/funds.