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3 High-Yield Bonds for Stunning Returns

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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 rated below investment grade are believed to be riskier than investment grade bonds, a well-diversified portfolio of these securities bear lesser risk. Thus, mutual funds maintaining a portfolio of these securities are 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 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.

BlackRock High Yield Bond Portfolio Service Shares BHYSX seeks to boost total returns on investment. BHYSX invests a bulk of its assets in non-investment grade bonds (high-yield bonds), which have maturity of 10 years or lower. It invests about 30% of its assets in foreign currency denominated issuers located offshore. BlackRock High Yield Bond Portfolio Service Shares has returned 3.1% in the last one-year period.

James Keenan is the fund manager of BHYSX since 2007.

Nuveen High Income Bond A (FJSIX - Free Report) invests a majority of its assets in lower-rated bonds commonly known as “junk bonds.” The fund may also invest a maximum of 20% of its assets in fixed and floating rate loans. Further, it may invest in exchange-traded funds, closed-end funds and investment companies. Nuveen High Income Bond A has returned 2.8% over the last one-year period. 

FJSIX has an expense ratio of 1.01% compared with the category average of 1.02%.

Fidelity Capital & Income FAGIX primarily focuses on acquiring debt securities that are rated below investment grade. FAGIX also invests in equity securities of companies that are facing unfavorable financial conditions throughout the globe. Factors such as industry position and economic condition are considered before investing in a security. Fidelity Capital & Income Fund has one-year annualized returns of 6%.

As of April 2018, FAGIX held 668 issues, with 2.01% of its total assets invested in Ally Financial Inc. 8%.

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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