Top 5 High Yield Mutual Funds - Best of Funds

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High yield securities are the preferred option for investors who have a reasonable appetite for risk and who are willing to forgo equity growth for current income. This category of securities comprises of corporate bonds of low quality, convertible securities and preferred stock, all of which carry a significant amount of risk. Mutual funds are a prudent method to invest in this class of funds as they significantly reduce the risk involved by holding a well diversified portfolio. Such funds may also seek capital appreciation as a secondary objective.

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.

Federated High-Income Bond A (FHIIX) seeks current income. The fund invests heavily in a wide range of high-yield corporate bonds with lower ratings. The fund may also utilize synthetic instruments such as derivatives to fulfill its investment objectives. This high yield mutual fund returned 5.44% over the last one year period.

Mark E. Durbiano is the fund manager and he has managed this high yield mutual fund since 1987.

Vanguard High-Yield Corporate (VWEHX) invests the majority of its assets in corporate bonds assigned the lowest investment grade rating by a renowned bond rating agency. Up to 20% of its assets may be utilized to hold securities rated below investment grade. The high yield mutual fund has a three year annualized return of 19.17%.

As of September 2011, this high yield mutual fund held 353 issues, with 1.28% of its total assets invested in Cit Grp 7%.

Rydex High Yield Strategy A (RYHDX) seeks to mimic the performance of the high yield bond market. The fund 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. This high yield mutual fund returned 5.17% over the last one year period.

The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 1.54% compared to a category average of 1.14%.

Fidelity Focused High Income ( FHIFX) primarily invests in income generating debt securities. The fund may invest in securities which do not yield income, such as common stocks. The high yield mutual fund has a five year annualized return of 6.03%.

Matt Conti is the fund manager and he has managed this high yield mutual fund since 2004.

T. Rowe Price High-Yield ( PRHYX) seeks high current income. The fund invests a large proportion of its assets in a wide range of high yield corporate bonds, preferred stocks and convertible securities. The high yield mutual fund has a ten year annualized return of 8.08%.

The high yield mutual fund has a minimum initial investment of $2,500 and an expense ratio of 0.74% compared to a category average of 1.14%.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Mutual Funds

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