High-yield bond mutual funds provide the best choice for those looking to invest in below investment-grade bonds, also known as junk bonds. Though bonds that are rated below investment grade are believed to be riskier than investment grade bonds, a well-diversified portfolio of these securities reduce the risk of a portfolio. Thus mutual funds maintaining a portfolio of these securities are the best for investors as these allocate their assets in such securities from a wide range of sectors.
Moreover, these funds are expected to provide better returns than those investing in securities with higher ratings, including government and corporate bonds. Also, due to their higher yield feature, junk bonds are believed to be less susceptible to interest rate fluctuations.
Below we share with you four top-ranked high-yield bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of high-yield bond mutual funds.
BlackRock High Yield Bond Investor A (BHYAX - Free Report) seeks maximization of returns along with growth of income. BHYAX invests the lion’s share of its assets in high-yield bonds. The fund may invest almost 30% of its assets in bonds that are non-dollar denominated and issued by companies based outside the United States. The fund may also invest its assets in convertible as well as preferred securities. BlackRock High Yield Bond Investor A has returned 13.5% over the last one-year period.
BHYAX has an expense ratio of 0.92% compared with the category average of 1.06%.
Principal High Yield Fund A (CPHYX - Free Report) invests a bulk of its assets in high-yield bonds or junk bonds that are below investment grade. These bonds are rated Ba1 or lower by Moody's and BB+ or lower by S&P Global. The fund also invests in bank loans and securities of non-U.S. issuers, including those that are based in developing countries. The fund seeks to offer a high level of income.Principal High Yield Fund A has returned 13.5% over the last one-year period.
As of March 2017, CPHYX held 395 issues, with 1.42% of its assets invested in
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Goldman Sachs High Yield Fund A (GSHAX - Free Report) seeks growth of income constant with growth of capital. GSHAX invests a major portion of its assets in fixed income securities that are non-investment grade. The fund may also invest almost one-fourth of its assets in securities of U.S. as well as non-U.S. companies, denominated in currencies other than the U.S. dollar. Goldman Sachs High Yield Fund A has returned 13.5% over the last one-year period.
Robert Magnuson is one of the fund managers of GSHAX since 2014.
PIMCO High Yield Spectrum Fund D invests primarily in a wide range of portfolio of high-yield securities or junk bonds, which include convertibles, warrants or derivatives such as swap agreements. These securities are rated below investment grade by Moody's, or equivalently by S&P or Fitch. PIMCO High Yield Spectrum Fund D has returned 14.3% over the last one-year period.
PHSDX has an expense ratio of 0.95% compared with the category average of 1.06%.
To view the Zacks Rank and past performance of all high-yield bond mutual funds, can click here to see the complete list of high-yield bond mutual funds.
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