Investors looking to invest in bonds rated lower than investment-grade can think of investing in high-yield bonds or junk bonds. Mutual funds having significant exposure in high-yield bonds 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.
Although bonds 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.
Below we share with you three 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.
Ivy High Income Y (WHIYX - Free Report) seeks maximization of returns through growth of income and appreciation of capital. WHIYX maintains a diversified portfolio by investing mainly in fixed-income securities that have high risk as well as high yield. The fund may invest almost all its assets in non-U.S. securities that are denominated in foreign currencies or U.S. dollar. Ivy High Income Y has one-year annualized returns of 4.4%.
As of March 2018, WHIYX held 267 issues, with 2.63% of its total assets invested in New Cotai, LLC and New Cotai Capital Corp 0.11%.
Fidelity High Income (SPHIX - Free Report) invests mainly in income-generating debt securities, convertible bonds and preferred stocks. The fund seeks to increase income and capital growth. SPHIX invests specifically in companies, which have a weak financial position. It invests in both U.S. and non-U.S. companies. Fidelity High Income has one-year annualized returns of 4.1%.
SPHIX has an annual expense ratio of 0.70%, lower than the category average of 0.98%.
Credit Suisse Floating Rate High Income A (CHIAX - Free Report) seeks appreciation of income and capital. CHIAX invests a bulk of its assets in high-yield, fixed-income securities or junk bonds. The fund may invest about 30% of its assets in securities of foreign companies. Credit Suisse Floating Rate High Income A has one-year annualized returns of 3.5%.
Thomas J. Flannery is one of the fund managers of CHIAX since 2010.
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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