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Investors have been slowly coming back to the bond markets since the first week of April, after it recovered from its worst slide in more than a decade. The yield curve is no longer inverted and has instilled a new-found confidence among investors despite the coronavirus pandemic.
Additionally, as the economy gradually reopens across states, fears surrounding the disease are decreasing as well. Therefore now would be the time to invest in the bond market in a bid to go defensive.
U.S. High-Yield Bonds Receive Record Inflows
According to Lipper data, investments in U.S. high-yield taxable corporate bond funds received a record $7.66 billion in the week ended Apr 17 as U.S. taxable bond funds took in $10.3 billion. Investors broke six weeks of a losing streak for investment-grade debt in the said week, when market volatility began to slowly fade.
Major reasons behind the recovery in bond markets were the broader equity markets slowly gaining stability, the S&P 500 index raking in gains, the government’s $2 trillion stimulus package and signs of a slowdown in the number of infections across the United States.
According to Scott Roberts, a high-yield portfolio manager who takes care of over $6 billion at Invesco, high yield was a “once-in-a-decade opportunity” which will be “gone way before the fear subsides.” Roberts also said that high yield has “a history of bouncing back strongly from episodes of massive fear.”
3 Best Funds to Buy
We have, therefore, selected three high-yield bond mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds 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).
Fidelity Focused High Income Fund (FHIFX - Free Report) aims to raise its long-term total return, which is on par with its capital preservation. The fund invests the majority of its assets in high-yield bonds. The fund may also invest a lesser amount in non-U.S. dollar-denominated securities.
This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FHIFX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.79%, which is below the category average of 1.02%. The fund has returned 2.2% over the past three years. FHIFX has no minimum initial investment.
Virtus Seix High Yield Fund Class A (HYPSX - Free Report) aims for high income and capital growth. The fund invests the majority of its assets in lower-rated, higher-yielding debt securities. The fund invests in debt obligations of U.S. and foreign issuers alike.
This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
HYPSX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.82%, which is below the category average of 1.02%. The fund has returned 1.1% over the past three years. HYPSX has a minimum initial investment of $2500.
Segall Bryant & Hamill Quality High Yield Fund Retail Class (WTLTX - Free Report) aims for high long-term total return through its investments in high-yield securities. The fund invests the majority of its assets in high-yield bonds and may invest a lesser amount in non-U.S. dollar-denominated securities.
This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
WTLTX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.85%, which is below the category average of 1.02%. The fund has returned 1.1% over the past three years. WTLTX has a minimum initial investment of $2500.
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3 High-Yield Bond Funds to Buy on Record Inflows
Investors have been slowly coming back to the bond markets since the first week of April, after it recovered from its worst slide in more than a decade. The yield curve is no longer inverted and has instilled a new-found confidence among investors despite the coronavirus pandemic.
Additionally, as the economy gradually reopens across states, fears surrounding the disease are decreasing as well. Therefore now would be the time to invest in the bond market in a bid to go defensive.
U.S. High-Yield Bonds Receive Record Inflows
According to Lipper data, investments in U.S. high-yield taxable corporate bond funds received a record $7.66 billion in the week ended Apr 17 as U.S. taxable bond funds took in $10.3 billion. Investors broke six weeks of a losing streak for investment-grade debt in the said week, when market volatility began to slowly fade.
Major reasons behind the recovery in bond markets were the broader equity markets slowly gaining stability, the S&P 500 index raking in gains, the government’s $2 trillion stimulus package and signs of a slowdown in the number of infections across the United States.
According to Scott Roberts, a high-yield portfolio manager who takes care of over $6 billion at Invesco, high yield was a “once-in-a-decade opportunity” which will be “gone way before the fear subsides.” Roberts also said that high yield has “a history of bouncing back strongly from episodes of massive fear.”
3 Best Funds to Buy
We have, therefore, selected three high-yield bond mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds 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).
Fidelity Focused High Income Fund (FHIFX - Free Report) aims to raise its long-term total return, which is on par with its capital preservation. The fund invests the majority of its assets in high-yield bonds. The fund may also invest a lesser amount in non-U.S. dollar-denominated securities.
This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FHIFX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.79%, which is below the category average of 1.02%. The fund has returned 2.2% over the past three years. FHIFX has no minimum initial investment.
Virtus Seix High Yield Fund Class A (HYPSX - Free Report) aims for high income and capital growth. The fund invests the majority of its assets in lower-rated, higher-yielding debt securities. The fund invests in debt obligations of U.S. and foreign issuers alike.
This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
HYPSX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.82%, which is below the category average of 1.02%. The fund has returned 1.1% over the past three years. HYPSX has a minimum initial investment of $2500.
Segall Bryant & Hamill Quality High Yield Fund Retail Class (WTLTX - Free Report) aims for high long-term total return through its investments in high-yield securities. The fund invests the majority of its assets in high-yield bonds and may invest a lesser amount in non-U.S. dollar-denominated securities.
This Zacks sector – High Yield-Bonds has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
WTLTX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.85%, which is below the category average of 1.02%. The fund has returned 1.1% over the past three years. WTLTX has a minimum initial investment of $2500.
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 >>