For the average investor, high yield mutual funds are the best method to invest in bonds rated below investment grade, popularly known as junk bonds. This is because these funds hold a wide range of such securities, significantly reducing portfolio risk. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, because the yield from such bonds is higher than investment grade securities, these investments are less susceptible to interest rate fluctuations.
Below we will share with you the 5 highest yielding Zacks #1 ranked high yield mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all high yield funds, then click here.
|Transamerica Partners High Yield Bond Fund
|Delaware Pooled High-Yield Bond Fund
|Touchstone High Yield A
|Waddell & Reed High Income A
|John Hancock2 High Yield 1
Transamerica High Yield Bond seeks a high level of current income. The fund invests in preferred stocks and high yield debt securities. The majority of the fund’s assets are used to purchase junk bonds and related securities. It utilizes an underlying fund to purchase these instruments. The high yield has a three year annualized return of 11.55%.
The high yield mutual fund has a minimum initial investment of $5000 and an expense ratio of 1.10% compared to a category average of 1.16%.
Delaware Pooled High-Yield Bond (DPHYX - Free Report) invests the majority of its assets in high-yield fixed income securities. Not more than 25% of its assets may be utilized to purchase securities issued by companies domiciled abroad. The high yield fund has a five year annualized return of 9.76%.
Chuck M. Devereux is the fund manager and she has managed this high yield mutual fund since 2007.
Touchstone High Yield A (THYAX - Free Report) seeks significant income with capital growth as a secondary objective. The fund invests a large proportion of its assets in debt securities rated below investment grade. The fund focuses on acquiring high yield securities issued by companies from the U.S. The high yield fund returned 12.31% over the last one year period.
As of June 2011, this high yield mutual fund held 189 issues, with 3.59% of its total assets invested in Touchstone Institutional Money Market.
Waddell & Reed High-Income A invests the majority of its assets in a wide range of high yield debt instruments, the risk associated with which is in consonance with the fund’s objective. The fund purchases fixed-income securities without regard to their maturity period. The high yield has a ten year annualized return of 7.14%.
The high yield mutual fund has a minimum initial investment of $500 and an expense ratio of 1.09% compared to a category average of 1.16%.
John Hancock2 High Yield 1 (JIHDX - Free Report) seeks high total return. It invests the majority of its assets in corporate bonds, preferred stocks, government and asset backed securities. It may purchase foreign bonds as well as fixed-income securities denominated in foreign currencies. The high yield fund returned 13.45% over the last one year period.
Stephen A. Walsh is the fund manager and she has managed this high yield mutual fund since 2006.
To view the Zacks Rank and past performance of all high yield mutual 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.