Investors willing to undertake a reasonable amount of risk in pursuit of high income levels would do well to consider high yield bonds. This category generally represents corporate bonds with low ratings, often below investment grade. A significant amount of risk is therefore associated with these investments and mutual funds can be the best option to invest in these instruments. By investing in a well diversified portfolio of such securities can successfully lower the associated risk for the investor.
Below we will share with you 5 top rated high yield funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all high yield funds, then click here.
Delaware High-Yield Opportunities A (DHOAX - MF report) invests the majority of its assets in corporate bonds rated below investment-grade by renowned ratings firms such as Standard & Poors. The fund may also purchase unrated securities of similar quality. It may also invest in domestic and foreign government securities. This high yield fund returned 50% over the last one year period.
The high yield fund has a minimum initial investment of $1,000 and an expense ratio of 1.15% compared to a category average of 1.21%.
Rydex/SGI High Yield A (SIHAX) seeks current income. It invests the majority of its assets in a wide range of high-yield debt securities. These securities are generally rated below the top four investment grades by a renowned ratings firm. Up to 10% of the securities purchased by the fund may be in default at the time of purchase. The fund has a five year annualized return of 7.89%.
David G. Toussaint is the fund manager and he has managed this precious metals fund since 2000.
AIM High Yield A (AMHYX - MF report) invests at least 80% of its assets in debt securities rated below investment grade. Up to 25% of its assets may be used to purchase foreign securities and up to 15% may be invested in emerging market securities. The fund returned 55.33% in the last one year period and has a three year annualized return of 5.68%.
As of December 2009, this high yield fund held 336 issues, with 1.29% of its total assets invested in Nielsen Finance LLC.
Legg Mason Western Asset High Yield Bond A (SAHYX) invests at least 80% of its assets in high yield bonds and related securities. Up to 35% of its assets may be utilized to purchase sovereign debt issued by governments from emerging markets and their agencies. The fund has a five year annualized return of 5.4%.
The fund has an expense ratio of 1.19% compared to a category average of 1.21%.
Transamerica Partners High Yield Bond (DVHYX - MF report) seeks high current income. It invests in preferred stocks and high yield debt securities. The majority of its assets are used to purchase junk bonds and related securities. It is a no-load fund.
The high yield fund has a ten year annualized return of 7.04%.
To view the Zacks Rank and past performance of all high yield funds, then click here.
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/mutualfund/