3 High-Yield Bond Funds to Buy for Steady Returns

High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which are considered to have a weaker financial condition but benefit as the economy moves north. Though high-yield bonds are more exposed to credit risk, these have less exposure to interest rate risk, making them a differentiated source of return. Despite the headwinds faced during Fed’s tightening of monetary policy, with indications coming in from the Fed that it might slow down its steep rate of hikes, these bonds are poised to grow.

Below, we share with you three top-ranked high-yield bond mutual funds, namely Manning & Napier Fd, Inc. High Yield Bond Series MNHYX, Fidelity Advisor Floating Rate High Income Fund FFRAX and Fidelity Capital and Income Fund FAGIX. 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.

Manning & Napier Fd, Inc. High Yield Bond Series invests the majority of its assets in bonds that are rated below investment grade and other financial instruments, mainly derivative instruments and ETFs, with economic characteristics similar to non-investment grade securities. MNHYX may invest part of its assets in bank loans. The fund has returned 3.1% over the past three years.

As of June 2022, MNHYX has 16.6% of its assets invested in Total Misc Bonds.

Fidelity Advisor Floating Rate High Income Fund aims for a high level of current income by investing the majority of its assets in floating-rate loans and securities. FFRAX invests in companies in troubled or uncertain financial conditions, using the fundamental analysis of each issuer's financial condition and industry position, and market and economic conditions. The fund has returned 2.4% over the past three years.

Eric Mollenhauer has been one of the fund managers of FFRAX since 2013.

Fidelity Capital and Income Fund invests in equity and debt securities with an emphasis on lower-quality debt securities and defaulted securities. FAGIX invests in companies in troubled or uncertain financial conditions using fundamental analysis of each issuer's financial condition and industry position, and market and economic conditions to decide its investments. The fund has returned 4.4% over the past three years.

FAGIX has an expense ratio of 0.67% compared with the category average of 0.95%.

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

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