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4 Best-Performing High-Yield Mutual Funds in 2019 So Far
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While investors rejoice the Dow’s feat to breach the 27,000 level and the S&P 500 recently breezing past 3,000, market pundits have some good news to share. If the broader index surges another 4%, the S&P 500 will more than double its last peak in the last bull market.
Moreover, there have been only three instances of such an event happening: the bull run in the 1950s, the 1980s and the 1990s. Also, after the 20% dip in the latter half of 2018, investors scaled back their expectations from the markets. Furthermore, a spate of weak economic data also resulted in a dovish Fed.
That said, Wall Street had a record-shattering first half. The three major indices — the Dow, the S&P 500 and the Nasdaq — rose an impressive 14%, 17.4% and 20.7%, respectively. Further, the broader S&P 500 notched its best performance in the first six months of the year since 1997.
Positive developments on the U.S.-China trade war front, Fed’s dovish stance and a rebound in crude oil prices provided the necessary stimulus to the stock market.
Therefore, investors possessing an appetite for risk should consider high-yield mutual funds for higher returns on high risks. Let’s look at how some of the best-performing funds from the category have fared so far this year.
Why Invest in High Yield Mutual Funds?
Investors seeking bonds rated lower than investment grade can consider 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 best for investors as these allocate their assets in such securities from a wide range of sectors.
4 High Yield Mutual Funds to Buy
We have, thus, selected four high-yield mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors.Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
TIAA-CREF High-Yield Retail (TIYRX - Free Report) fund seeks a high level of income as well as appreciation of capital. TIYRX invests mainly in fixed-income securities that have high yields and are rated lower than investment-grade.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 11.4%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TIYRXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.62%, which is below the category average of 1.01%.
Fidelity High Income (SPHIX - Free Report) fund 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 that have a weak financial position. It invests in both U.S. and non-U.S. companies.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 10.1%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SPHIXcarries a Zacks Mutual Fund Rank #2and has an annual expense ratio of 0.70%, which is below the category average of 1.01%.
American Funds American High-Income R4 (RITEX - Free Report) fund seeks to offer maximization of income as well as appreciation of capital. The fund invests primarily in debt securities that are rated BB+ or lower or Ba1 or lower by Nationally Recognized Statistical Rating Organizations or those that are unrated.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 9.3%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
RITEXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.70%, which is below the category average of 1.01%.
Fidelity Focused High Income (FHIFX - Free Report) fund seeks high income and capital appreciation by investing in preferred stocks, income-generating debt securities and mostly in lower-quality debt securities. The fund invests in both domestic and foreign securities.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 11%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FHIFXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.79%, which is below the category average of 1.01%.
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4 Best-Performing High-Yield Mutual Funds in 2019 So Far
While investors rejoice the Dow’s feat to breach the 27,000 level and the S&P 500 recently breezing past 3,000, market pundits have some good news to share. If the broader index surges another 4%, the S&P 500 will more than double its last peak in the last bull market.
Moreover, there have been only three instances of such an event happening: the bull run in the 1950s, the 1980s and the 1990s. Also, after the 20% dip in the latter half of 2018, investors scaled back their expectations from the markets. Furthermore, a spate of weak economic data also resulted in a dovish Fed.
That said, Wall Street had a record-shattering first half. The three major indices — the Dow, the S&P 500 and the Nasdaq — rose an impressive 14%, 17.4% and 20.7%, respectively. Further, the broader S&P 500 notched its best performance in the first six months of the year since 1997.
Positive developments on the U.S.-China trade war front, Fed’s dovish stance and a rebound in crude oil prices provided the necessary stimulus to the stock market.
Therefore, investors possessing an appetite for risk should consider high-yield mutual funds for higher returns on high risks. Let’s look at how some of the best-performing funds from the category have fared so far this year.
Why Invest in High Yield Mutual Funds?
Investors seeking bonds rated lower than investment grade can consider 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 best for investors as these allocate their assets in such securities from a wide range of sectors.
4 High Yield Mutual Funds to Buy
We have, thus, selected four high-yield mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors.Moreover, these funds have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
TIAA-CREF High-Yield Retail (TIYRX - Free Report) fund seeks a high level of income as well as appreciation of capital. TIYRX invests mainly in fixed-income securities that have high yields and are rated lower than investment-grade.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 11.4%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
TIYRXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.62%, which is below the category average of 1.01%.
Fidelity High Income (SPHIX - Free Report) fund 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 that have a weak financial position. It invests in both U.S. and non-U.S. companies.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 10.1%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SPHIXcarries a Zacks Mutual Fund Rank #2and has an annual expense ratio of 0.70%, which is below the category average of 1.01%.
American Funds American High-Income R4 (RITEX - Free Report) fund seeks to offer maximization of income as well as appreciation of capital. The fund invests primarily in debt securities that are rated BB+ or lower or Ba1 or lower by Nationally Recognized Statistical Rating Organizations or those that are unrated.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 9.3%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
RITEXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.70%, which is below the category average of 1.01%.
Fidelity Focused High Income (FHIFX - Free Report) fund seeks high income and capital appreciation by investing in preferred stocks, income-generating debt securities and mostly in lower-quality debt securities. The fund invests in both domestic and foreign securities.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. Specifically, the fund's return over the YTD benchmark is 11%.To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FHIFXcarries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.79%, which is below the category average of 1.01%.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>