Investors looking to increase income flows from their fixed-income portfolios would do well to select high yield bonds. These securities typically provide higher returns than government and corporate bonds with higher ratings because many of them are issued by good companies going through a bad patch. However, bondholders are paid first in the event of bankruptcy, which means these instruments have a clear advantage over equity. Mutual funds hold a wide range of such securities, further reducing risk and are an optimal choice for retail investors.
Below we will share with you 5 top rated 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.
JPMorgan High Yield A (OHYAX) invests a large proportion of its assets in debt securities, including bonds which is unrated or rated below investment grade. Not more than 30% of its assets may be invested in loans and unfunded commitments. The high yield mutual fund has a five year annualized return of 8.7%.
The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.14% compared to a category average of 1.20%.
Transamerica Partners High Yield Bond (DVHYX) seeks high current income. The fund uses an underlying fund with similar goals to invest in securities. The majority of its assets are used to purchase junk bonds and related securities. The high yield mutual fund has a ten year annualized return of 7.82%.
Michael Weilheimer is the fund manager and she has managed this high yield mutual fund since 2000.
Delaware High-Yield Opportunities A (DHOAX) 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. This high yield mutual fund returned 17.61% over the last one year period.
The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.11% compared to a category average of 1.20%.
John Hancock2 High Yield 1 (JIHDX) 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 mutual fund has a three year annualized return of 11.06%.
As of December 2010, this high yield mutual fund held 336 issues, with 1.55% of its total assets invested in Ultra Long Us Treas Bond Ftrs Mar11 Xcbt.
Rydex High Yield Strategy A (RYHDX) invests in high yield debt securities. The fund may also invest in securities which as a whole mimic the performance of the U.S and Canadian high yield bond markets. The high-yield mutual fund returned 19.77% over the last one year period.
Michael P. Byrum is the fund manager and he has managed this high yield mutual fund since 2007.
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 http://www.zacks.com/funds.
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