Top 5 High Yield Mutual Funds (May 2011)

Investors with a reasonably high appetite for risk in pursuit of significantly high income levels would do well to consider high yield bonds. This category of fixed-income securities generally represents corporate bonds with low ratings, often below investment grade. A significant amount of risk is therefore associated with these investments and mutual funds are the best option to invest in these instruments. By investing in a well diversified portfolio of such securities they successfully lower the associated risk for the investor.

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.

Touchstone High Yield A (THYAX) invests a large proportion of its assets in debt securities rated below investment grade. The fund focuses on acquiring high yield securities issued by companies from the U.S. The high yield mutual fund has a three year annualized return of 11.1%.

As of March 2011, this high yield mutual fund held 180 issues, with 3.59% of its total assets invested in Touchstone Institutional Money Market.

Columbia High Yield Bond A (INEAX) seeks high current income. The majority of the fund’s assets are utilized to purchase debt securities rated below investment grade. Not more than 25% of its assets are invested in foreign high-yield debt instruments. The high yield mutual fund has a ten year annualized return of 5.36%.

Scott Schroepfer is the fund manager and he has managed this high yield mutual fund since 1999.

Delaware High-Yield Opportunities A (DHOAX) invests a large proportion 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 15.21% 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 1.18%.

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 five year annualized return of 8.37%.

Stephen A. Walsh is the fund manager and he has managed this high yield mutual fund since 2006.

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. This high yield mutual fund returned 13.4% over the last one year period.

The high yield mutual fund has a minimum initial investment of $1,000 and an expense ratio of 1.14% compared to a category average of 1.18%.

To view the Zacks Rank and past performance of all high yield mutual funds, then click here.

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