Corporate high yield securities are an excellent choice for investors with some risk tolerance and who seek current income rather than equity growth. These securities are typically corporate bonds with lower credit qualities which carry a significant amount of risk. High yield mutual funds are a better choice in this case as they reduce the risk involved by investing in a wide range of such lower rated securities. They may also seek capital appreciation as a secondary objective and help with portfolio diversification, even improving a portfolio’s risk profile.
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 corporate high yield funds, then click here.
Eaton Vance Income Fund of Boston A (EVIBX) invests a large share of its assets in bonds issued for the purpose of highly leveraged transactions such as mergers and acquisitions. It may also invest in debt securities which generate income as well as derivatives such as futures and contracts. This corporate high yield fund returned 57% over the last one year period.
This high yield fund has a minimum initial investment of $1000 and an expense ratio of 1.07% compared to a category average of 1.21%.
Northeast Investors (NTHEX) seeks current income by investing the majority of its assets in leading companies, which may also provide capital appreciation. It is a no-load fund.
This high yield fund returned 56.37% in 2009 and has a ten year annualized return of 4.11%.
AIM High Yield A (AMHYX) invests at least 80% of its assets rated below investment grade. It may also invest up to 25% of its assets to purchase assets in foreign securities and up to 15% to purchase assets in securities issued by companies form developing markets. The fund has a five year annualized return of 5.55%.
As of December 2009, this high yield fund held 336 issues, with 1.29% of its total assets invested in Nielsen Finance LLC.
Fidelity High Income (SPHIX) primarily seeks high current income and may also look for capital appreciation. It focuses on purchasing debt securities which have the potential to generate income as well as preferred stock and convertible securities. The fund returned 51.46% over the last one year period and has a five year annualized return of 6.31%.
Peter Ehret is the fund manager and has managed this high yield fund since 2001.
Federated High-Income Bond A (FHIIX) invests in a wide range of junk bonds to generate high levels of current income. Securities which generate high yields, have relatively low credit risk and ensure that the portfolio is well diversified are preferred. The high yield fund returned 51.14% over the last one year period
This high yield fund has a minimum initial investment of $1,500 and has an expense ratio of 1.24% compared to a category average of 1.21%.
To view the Zacks Rank and past performance of all corporate 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 http://www.zacks.com/funds/mutualfund/.
