Investors looking to invest in bonds rated lower than investment-grade can think of investing in high-yield bonds or junk bonds. Mutual funds having significant exposure in high-yield bonds are expected to provide better returns than those investing in securities with higher ratings, including government and corporate bonds. Also, due to their higher-yield feature, junk bonds are believed to be less susceptible to interest rate fluctuations.
Although bonds rated below investment grade are believed to be riskier than investment grade bonds, a well-diversified portfolio of these securities reduce the risk of a portfolio.
Thus mutual funds maintaining a portfolio of these securities are the best for investors as these allocate their assets in such securities from a wide range of sectors.
Below we share with you three top-ranked high-yield bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future.
Buy These 3 Zacks Rank #1 High-Yield Bond Mutual Funds: Ivy High Income Fund (WHIYX)
Ivy High Income Fund (MUTF:WHIYX) seeks maximization of returns through growth of income and appreciation of capital. WHIYX maintains a diversified portfolio by investing mainly in fixed-income securities that have high risk as well as high yield.
The fund may invest almost all its assets in non-U.S. securities that are denominated in foreign currencies or U.S. dollar. Ivy High Income Y has one-year annualized returns of 4.4%.
As of March 2018, WHIYX held 267 issues, with 2.63% of its total assets invested in New Cotai, LLC and New Cotai Capital Corp 0.11%.
Buy These 3 Zacks Rank #1 High-Yield Bond Mutual Funds: Fidelity High Income Fund (SPHIX)
Fidelity High Income Fund (MUTF:SPHIX) invests mainly in income-generating debt securities, convertible bonds and preferred stocks.
The fund seeks to increase income and capital growth. SPHIX invests specifically in companies, which have a weak financial position. It invests in both U.S. and non-U.S. companies. Fidelity High Income has one-year annualized returns of 4.1%.
SPHIX has an annual expense ratio of 0.70%, lower than the category average of 0.98%.
Buy These 3 Zacks Rank #1 High-Yield Bond Mutual Funds: Credit Suisse Floating Rate High Income Fund (CHIAX)
Credit Suisse Floating Rate High Income Fund (MUTF:CHIAX) seeks appreciation of income and capital. CHIAX invests a bulk of its assets in high-yield, fixed-income securities or junk bonds. The fund may invest about 30% of its assets in securities of foreign companies. Credit Suisse Floating Rate High Income A has one-year annualized returns of 3.5%.
Thomas J. Flannery is one of the fund managers of CHIAX since 2010.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>