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4 Top-Rated High-Yield Bond Mutual Funds

Investors interested in deriving returns by gaining exposure to investment-grade bonds, also known as junk bonds, may consider high-yield bond mutual funds. These funds are expected to provide better returns than 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.

Though bonds that are rated below investment grade are believed to be riskier than investment grade bonds, a well-diversified portfolio of these securities has a lower level of risks. Thus mutual funds maintaining a portfolio of these securities from a wide range of sectors are the best for investors.

Below we share with you four 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. To view the Zacks Rank and past performance of all high-yield bond mutual funds, investors can click here to see the complete list of high-yield bond mutual funds.

Vanguard High-Yield Corporate Investor (VWEHX) invests primarily in a diversified group of high-yielding, higher-risk corporate bonds, with medium- and lower-range credit-quality ratings. VWEHX primarily invests in corporate bonds with rating lower than Baa by Moody's or are unrated. Securities in VWEHX’s portfolio are expected to have maturity periods between short and intermediate durations. Vanguard High-Yield Corporate Investor has a three-month return of 2.3%.

Michael L. Hong is the fund manager of VWEHX since 2008.

Eaton Vance Income Fund of Boston A (EVIBX) seeks high current income. EVIBX invests a large chunk of its assets in high yield, high risk corporate bonds commonly referred to as "junk bonds," which are rated lower than investment grade. Eaton Vance Income Fund of Boston A has a three-month return of 3.3%.

As of Jan 2016, EVIBX held 484 issues with 0.9% of its assets invested in Alphabet Hldg Co 7.75%.

Fidelity Capital & Income (FAGIX) primarily focuses on acquiring debt securities that are rated below investment grade. FAGIX also invests in equity securities of companies that are facing unfavorable financial conditions throughout the globe. Factors such as industry position and economic condition are considered before investing in a security. Fidelity Capital & Income has a three-month return of 0.8%.

FAGIX has an expense ratio of 0.72% compared with the category average of 1.07%.

Buffalo High-Yield (BUFHX) invests a major portion of its net assets in higher yielding, higher-risk fixed income securities. BUFHX generally invests in securities having intermediate maturity durations. The fund may also invest in debt securities that are rated investment grade including U.S. Treasury Securities. Buffalo High-Yield has a three-month return of 0.8%.

As of Dec 2015, BUFHX held 135 issues with 0.9% of its assets invested in Lions Gate Entmnt 5.25%.

To view the Zacks Rank and past performance of all high-yield bond mutual funds, investors can click here to see the complete list of funds .

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at http://www.zacks.com/funds.


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