We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Investors possessing an appetite for risks could find high-yield bonds more profitable compared to government bond investments as well as investment grade bonds because of their greater returns.
These bonds are usually issued by relatively new corporate organizations that seek investments to further their business, thus offering more interest than companies that bear higher credit ratings.
While government bonds are undoubtedly risk-free, they generate low returns and thus have limited options for capital growth. However, high-yield bonds have scope to generate better returns since the issuer is rated lower than the investment grade. However, this isn’t indicative of the bond’s chances to fail and could ultimately generate more profit than investment-grade corporate organizations.
Although high yield bonds are deemed riskier than other bonds, these are less volatile than equity markets. Therefore, such bonds are more stable when compared to stock market investments.
In addition, if the credit standing of the organization that has issued the high-yield bond improves, the bond may generate an even higher return along with the added security that comes with being an investment grade bond.
Changes in monetary policy, by the way, since the 2008-09 economic crisis have made government bonds less preferable than high-yield bonds. Federal Reserve decreased returns on certain fixed income government bonds, lessening their popularity despite being risk-free and more stable.
4 High Yield Mutual Funds to Buy
We have selected some high-yield mutual funds that could be good investment options at present. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
American High-Income Trust, Class 529-A Shares (CITAX - Free Report) seeks high level of current income in the long term and good capital growth by investing in high-yielding and usually lower quality debt securities. The fund invests in U.S. and non-U.S. securities alike.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CITAXhas an annual expense ratio of 0.77%, which is below the category average of 1.01%. The fund has three and five-year returns of 6.72% and 2.46%, respectively.
Fidelity Focused High Income (FHIFX - Free Report) seeks high income and capital appreciation by investing in preferred stocks, income-generating debt securities and mostly in lower quality debt securities. The fund invests in both domestic and foreign securities.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FHIFXhas an annual expense ratio of 0.79%, which is below the category average of 1.01%. The fund has three and five-year returns of 4.83% and 2.97%, respectively.
Wells Fargo Short-Term High Yield Bond Fund Class A (SSTHX - Free Report) seeks high income and capital appreciation.The fund invests 80% of its net assets in corporate debt securities that are below investment-grade.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SSTHXhas an annual expense ratio of 0.81%, which is below the category average of 1.01%. The fund has three and five-year returns of 2.39% and 1.96%, respectively.
Vanguard High Yield Corporate Fund (VWEHX - Free Report) seeks high income and capital appreciation.The fund invests mostly in high-yielding, higher-risk corporate bonds. The fund invests about 80% of its net assets in corporate bonds that are rated below Baa by Moody's Investors Service, Inc.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
VWEHXhas an annual expense ratio of 0.23%, which is below the category average of 1.01%. The fund has three and five-year returns of 4.91% and 3.55%, respectively.
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 >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
4 High-Yield Mutual Funds to Buy in 2019
Investors possessing an appetite for risks could find high-yield bonds more profitable compared to government bond investments as well as investment grade bonds because of their greater returns.
These bonds are usually issued by relatively new corporate organizations that seek investments to further their business, thus offering more interest than companies that bear higher credit ratings.
While government bonds are undoubtedly risk-free, they generate low returns and thus have limited options for capital growth. However, high-yield bonds have scope to generate better returns since the issuer is rated lower than the investment grade. However, this isn’t indicative of the bond’s chances to fail and could ultimately generate more profit than investment-grade corporate organizations.
Although high yield bonds are deemed riskier than other bonds, these are less volatile than equity markets. Therefore, such bonds are more stable when compared to stock market investments.
In addition, if the credit standing of the organization that has issued the high-yield bond improves, the bond may generate an even higher return along with the added security that comes with being an investment grade bond.
Changes in monetary policy, by the way, since the 2008-09 economic crisis have made government bonds less preferable than high-yield bonds. Federal Reserve decreased returns on certain fixed income government bonds, lessening their popularity despite being risk-free and more stable.
4 High Yield Mutual Funds to Buy
We have selected some high-yield mutual funds that could be good investment options at present. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5,000.
We expect these funds to outperform peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
American High-Income Trust, Class 529-A Shares (CITAX - Free Report) seeks high level of current income in the long term and good capital growth by investing in high-yielding and usually lower quality debt securities. The fund invests in U.S. and non-U.S. securities alike.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
CITAXhas an annual expense ratio of 0.77%, which is below the category average of 1.01%. The fund has three and five-year returns of 6.72% and 2.46%, respectively.
Fidelity Focused High Income (FHIFX - Free Report) seeks high income and capital appreciation by investing in preferred stocks, income-generating debt securities and mostly in lower quality debt securities. The fund invests in both domestic and foreign securities.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FHIFXhas an annual expense ratio of 0.79%, which is below the category average of 1.01%. The fund has three and five-year returns of 4.83% and 2.97%, respectively.
Wells Fargo Short-Term High Yield Bond Fund Class A (SSTHX - Free Report) seeks high income and capital appreciation.The fund invests 80% of its net assets in corporate debt securities that are below investment-grade.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
SSTHXhas an annual expense ratio of 0.81%, which is below the category average of 1.01%. The fund has three and five-year returns of 2.39% and 1.96%, respectively.
Vanguard High Yield Corporate Fund (VWEHX - Free Report) seeks high income and capital appreciation.The fund invests mostly in high-yielding, higher-risk corporate bonds. The fund invests about 80% of its net assets in corporate bonds that are rated below Baa by Moody's Investors Service, Inc.
This Zacks sector – High Yield-Bonds product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
VWEHXhas an annual expense ratio of 0.23%, which is below the category average of 1.01%. The fund has three and five-year returns of 4.91% and 3.55%, respectively.
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 >>