For an average investor, high-yield bond mutual funds are the best 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 that reduce portfolio risk. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, since the yield from such bonds is higher than that of investment-grade securities, they are less susceptible to interest rate fluctuations.
Below, we share with you three top-ranked high-yield bond mutual funds, viz.,Neuberger Berman Floating Rate Inc NFIAX, Nuveen Credit Income FJSYX and T. Rowe Price Floating Rate Adv PAFRX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Neuberger Berman Floating Rate Inc fund invests in variable-rate senior secured loans issued in dollars by companies, partnerships and other business organizations in the United States and internationally that are often rated below investment grade. The NFIAX advisor also invests its assets in variable rate instruments, including loans and investment firms that provide exposure to such securities.
Neuberger Berman Floating Rate Inc fund has three-year annualized returns of 6.6%. Joseph P. Lynch has been one of the fund managers of NFIAX since December 2009.
Nuveen Credit Income fund seeks a high level of current income. FJSYX invests primarily in three low-correlated fixed income sectors — domestic investment grade, high yield and international.
Nuveen Credit Income fund has three-year annualized returns of 6.2%. FJSYX has an expense ratio of 0.79%.
T. Rowe Price Floating Rate Adv fund invests its assets along with borrowing, if any, in floating rate loans and floating rate debt securities, wherein floating rate loans represent amounts borrowed by companies or other entities from banks and other lenders. PAFRX advisors invest mostly in funds that are below investment grade or junk or unrated securities.
T. Rowe Price Floating Rate Adv has three-year annualized returns of 6.8%. As of the end of November 2024, PAFRX held 50.8% of its net assets in Misc Bonds.
To view the Zacks Rank and the past performance of all high-yield bond funds, investors can click here to see the complete list of high-yield bond funds.
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This article originally published on Zacks Investment Research (zacks.com).
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