Top 5 High Yield Funds - Mutual Fund Commentary

High yield securities are the preferred option for investors who have a reasonable appetite for risk and who are willing to forgo equity growth for current income. This category of securities comprises of corporate bonds of low quality, convertible securities and preferred stock, all of which carry a significant amount of risk. Mutual funds are a prudent method to invest in this class of funds as they significantly reduce the risk involved by holding a well diversified portfolio. Such funds may also seek capital appreciation as a secondary objective.

Below we will share with you 5 top rated high yield funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect the fund to outperform its peers in the future. To view the Zacks Rank and past performance of all high yield funds, then click here.

Legg Mason Western Asset High Yield Bond A (SAHYX) seeks total return. It invests at least 80% of its assets in high yield bonds and related securities. Up to 35% of its assets may also be utilized to purchase sovereign debt issued by governments from emerging markets. The fund has a five year annualized return of 4.8%.

The fund has an expense ratio of 1.19% compared to a category average of 1.21%.

MainStay High Yield Opportunities A (MYHAX) invests the majority of its assets in high yield corporate debt, including domestic and foreign securities rated below investment-grade. It holds long positions proportionate to 140% of net assets and short positions equal to 40% of net assets. The high yield fund returned 31.67% over the last one year period.

As of April 2010, this high yield fund held 202 issues, with 1.66% of its total assets invested in Freescale Semicon 144A 9.25%.

Rydex/SGI High Yield A (SIHAX) invests the majority of its assets in a wide range of high-yield debt securities. These securities are generally rated below the top four investment grades by a renowned ratings firm. Up to 10% of the securities purchased by the fund may be in default at the time of purchase. The fund has a ten year annualized return of 7.04%.

David G. Toussaint is the fund manager and has managed this high yield fund since 2000.

John Hancock2 High Yield 1 (JIHDX) 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. It is a no load fund.

The high yield fund returned 33.52% in the last one year period and has a three year annualized return of 4.2%.

USAA High-Yield Opportunities (USHYX) seeks high current income with a secondary objective of capital appreciation. At least 80% of its assets are used to purchase high yield securities such as bonds, convertible securities and preferred stocks. The high yield fund has a ten year annualized return of 6.44%.

The high yield fund has a minimum initial investment of $3,000 and an expense ratio of 0.99% compared to a category average of 1.21%.

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

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/mutualfund/