The next year, it came back with a return of positive 28.74. Bond Index Fund The Invesco QQQ Trust (QQQ) took in $11bn for the year to June, ranking as the sixth most popular fund during this period, shaking off $2.4bn in outflows in June to record $6bn of new money in the second quarter of … On top of this, most of the funds Goldstein owns in the fund pay high dividend yields. Morningstar. In no particular order, here are our top choices for high-yield bond funds: The Balance does not provide tax, investment, or financial services and advice. TCW.com. "Metropolitan West High Yield Bond M," Accessed April 15, 2020. Here are the best High Yield Bond funds. This cap-weighted index is designed to mirror the performance of the low-yielding segment of the USD-issued high-yield corporate bond market. The fund's top holdings are bonds from aerospace component manufacturer, TransDigm Group (TDG); media company, Clear Channel Outdoor Holdings, Inc. (CCO); and medical services company, Centene Corp. . The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is the most popular high yield bond fund, with over $30 billion in assets. The fund’s expense ratio is 0.36%. Because of that, the Special Opportunities Fund currently yields over 9%. Diversification is an investment strategy based on the premise that a portfolio with different asset types will perform better than one with few. Bonds that are backed by the government or one of its agencies have the best "creditworthiness" and a lower chance of default than most corporate bonds. Before buying high-yield bond funds, or any other investment, there are a handful of considerations to make during the research and analysis. Below, we've selected the top three high-yield corporate bond funds for 2020 by 1-year total return. "Solactive USD High Yield Corporates Total Market Low Beta Index – ETF Tracker," Accessed April 14, 2020. "Low Beta High Yield Bond ETF," Accessed April 14, 2020. Its first full year in operation, 2008 (a bad year for corporate high-yield bonds), the fund lost 17.19 percent. Fidelity® Series High Income Fund. A high-yield, or "junk" bond has a lower credit rating and thus pays a higher yield due to having more risk than higher rated bonds. This fund opened in April 2007. The best-performing high-yield corporate bond fund, based on performance over the past year, is the Metropolitan West High Yield Bond Fund (MWHYX). High Yield Bond Funds. Investopedia requires writers to use primary sources to support their work. A bond can receive a lower credit rating because of the risk of default on the part of the entity issuing the bond. In addition to investing in high-quality corporates, you can boost income—in small doses—with a multisector bond fund or a high-yield bond fund. A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are fixed income investments. Vanguard Long-Term Investment-grade Fund Investor Shares (VWESX) This fund contains high and … Fidelity Investments. All figures are as of April 14, 2020. Because junk bonds are susceptible to default and can be as volatile as individual stocks, they typically must offer high yields—6% or more—to be attractive. Investors striving for high-credit quality and improved returns over typical index funds might consider this WisdomTree bond fund offering. How to Choose the Best High Yield Bond Mutual Funds, 7 Best Bond Funds to Buy for Almost Any Investor, Top Balanced Funds to Buy for Long-Term Investment, See the Best Index Funds to Buy for Long-Term Investing, New to Investing? Think of a personal credit score. The 12-month yield is 2.6%, although the current stated yield is 1.21%. As compared with investment-grade bonds, high-yield corporate bonds offer higher interest rates because they have lower credit ratings. TCW High Yield Bond Fund. The fund's top holdings are bonds from the healthcare services company, HCA Healthcare Inc.(HCA); the food and drink packaging supplier, Reynolds Consumer Products (REYN); and healthcare services provider, Centene (CNC). , FDHY typically invests at least 80% of its assets in high-yield bonds in its goals of seeking a high level of income and capital appreciation. We have excluded funds with under $100 million in assets under management (AUM), as low-AUM funds sometimes lack sufficient liquidity to be easily investable. Here are the best High Yield Bond ETFs. iShares Broad USD High Yield Corp Bd ETF. We also reference original research from other reputable publishers where appropriate. This short-term bond fund with a 2.4% distribution yield is a good alternative to low-yield money market funds for cash needed within the upcoming few years. This means that any single default won't be as damaging to your portfolio. Past performance is not indicative of future results. You should NEVER invest your money with a fund manager for the long term. Best High-Yield Bond Funds: Vanguard High-Yield Corporate Fund (VWEHX) Expense Ratio: 0.23% per year, or $23 on a $10,000 investment. Top holdings are the securities with the greatest market value weight in a portfolio. The key is to invest in the best funds when the investment environment suits them and to ditch them when it doesn't, in favour of their peers most likely to outperform. High-yield bond portfolios concentrate on lower-quality bonds, which are riskier than those of higher- quality companies. the low end of the credit quality spectrum). The ETF has a weighted average maturity of roughly 4 years and an expense ratio of 0.49%. These include white papers, government data, original reporting, and interviews with industry experts. This fund aims to provide exposure to the full high-yield bond universe, repositioning itself over the course of the credit cycle in order to better manage risk-adjusted performance. Goldman Sachs Access Hi Yld Corp Bd ETF. These bonds are defined as securities with credit ratings less than BB. Get Started With These Top Vanguard Funds, These Are the 5 Types of Bond Mutual Funds to Know, Consider Floating-Rate Bonds as an Investment, The Best Mutual Funds for International Investing, Learn the Pros and Cons of Short-Term Bond vs. Money Market Funds, These Are the Best Types of Funds for 401(k) Plans, American Funds Review — Everything You Need to Know Before Investing, Bloomberg Barclays US Aggregate Bond Index. Average recent yield: 2.2%. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) A high beta index is a basket of stocks that exhibit greater volatility than a broader market index like the S&P 500. High-yield or “junk” bond funds. This is obviously not your typical sedate bond fund. Best Municipal Bond Fund: Vanguard High Yield Tax Exempt Fund (VWAHX) Holdings include up to 20% high-yield bonds, plus U.S. Treasurys, mortgage-backed securities and corporates, among other securities. When searching for high-yield bond funds, just be sure that you're not only looking for the highest yields. JNK – SPDR Barclays High Yield Bond ETF The fund has more than 7 billion in assets and is managed by Charlie McCarthy. … Currently, the fund's top holdings are bonds from healthcare services provider, Centene; wireless infrastructure company, SBA Communications Corp. (SBAC); and credit scoring company, Fair Isaac Corp. (FICO). , The Xtrackers Low Beta High Yield Bond ETF aims to match the performance of the Solactive USD High Yield Corporates Total Market Low Beta Index. ... Baillie Gifford High Yield Bond: 81.67: AXA Global High Income: 81.09: AXA Pan European High Yield Bond: 77.88: Schroder High Yield Opportunities: 77.11: Average: … RBC BlueBay High Yield Bond Fund. Fidelity Short Duration High Income (FSAHX): Investors wanting high yields but low-interest rate risk … If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years. ETFDB.com. Metropolitan West High Yield Bond Fund (MWHYX), Emerging Markets Bond Index (EMBI) Definition, Xtrackers Low Beta High Yield Bond ETF (HYDW), MetWest High Yield Bond Fund - M Share MWHYX, Solactive USD High Yield Corporates Total Market Low Beta Index – ETF Tracker. BMO US High Yield Bond Fund is an open-end fund incorporated in Canada. Vanguard High Yield Corporate Fund. Bond funds can help to lower this risk by allowing you to easily own a broad portfolio of high-yield bonds. ... high-yield closed-end funds can pay out a lot more. Seven best bond index funds to buy:-- Fidelity U.S. Xtrackers USD High Yield Corp Bd ETF. HYG was the first high-yield corporate bond fund, and it tracks a market-weighted index of U.S. high-yield corporate debt. High-quality intermediate-term municipal bond funds yield 1% and have the extra benefit of being exempt from federal tax. Six of the top 10 funds for flows for the year through June were bond funds or ETFs, with the only active fund to make the top 10 being the $17.3bn PGIM High Yield fund (PHYZX). Corporate bonds with high credit quality are considered investment-grade bonds, and those below investment grade are considered high-yield ("junk") bonds. If you want to build a diversified portfolio of income-generating investments, you'll need high-yield bond funds to complement your dividend funds. Kent Thune is the mutual funds and investing expert at The Balance. A high-yield, or "junk" bond has a lower credit rating and thus pays a higher yield due to having more risk than higher rated bonds. As treasury yields fall, high-yield bonds can seem increasingly attractive. The current yield for this fund is 6.27%, and the expense ratio for the fund is low at 0.58%. There are other qualities to consider when looking for the best funds to buy. Also known as junk bonds, high-yield bonds are bonds that pay higher yields because of low relative credit ratings. Here are two of the best actively-managed, go-anywhere, multi-sector bond funds: Loomis Sayles Bond (LSBRX) High Yield Bond High Yield Bond Funds and ETFs are mutual funds that focus on the high-yield or “junk” sector of the fixed-income market (i.e. The Analyst Rating for Funds is based on our fund analysts’ conviction in a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. More specifically, the bonds, or the entities issuing the bonds, have credit quality ratings below investment grade (a rating below BBB by Standard & Poor's or below Baa by Moody's credit rating agencies. It's the same concept with the issuing entities of bonds, which can be corporations, publicly-owned utilities, and state, local and federal governments. The best-performing high-yield corporate bond fund, based on performance over the past year, is the Metropolitan West High Yield Bond Fund (MWHYX). Similarly, funds not open to new investors and those with a minimum investment of more than $10,000 were excluded. PIMCO Active Bond ETF ( BOND ) Federated High-Income Bond A Fund, ticker FHIIX, is another popular choice for investors looking for high yields. Vanguard High-Yield Corporate Fund (VWEXH) Contact: 800-662-7447; Vanguard Investing involves risk including the possible loss of principal. The emerging markets bond index (EMBI) is a benchmark index for measuring the total return performance of international government bonds by emerging markets. AAA is highest). He is a Certified Financial Planner, investment advisor, and writer. The offers that appear in this table are from partnerships from which Investopedia receives compensation. You can learn more about the standards we follow in producing accurate, unbiased content in our. Therefore, because of this higher relative risk, the entities issuing these bonds will pay higher interest rates to compensate the investors for taking the risk of buying the bonds, thus the name high yield. BlackRock High Yield, one of the best bond funds of the past 10 years, has captured the upside in rallying markets and protected assets on the downside. "MetWest High Yield Bond Fund - M Share MWHYX," Accessed April 14, 2020. This fund seeks to track the Markit iBoxx USD Liquid High Yield Index. Among bond funds, some of the largest are passively managed ETFs — and that is true when it comes to high-yield bond funds, too. All figures are as of April 14, 2020. The S&P 500 High Beta Index is the most well-known of these indexes. The information is being presented without consideration of the investment objectives, risk tolerance or financial circumstances of any specific investor and might not be suitable for all investors. Only one open-end, or mutual, fund makes the list of low-cost products: Vanguard High-Yield Corporate. One of the best high yield corporate bond funds for a number of investors is the BlackRock High Yield Bond Fund, symbol BRHYX. The Vanguard Intermediate-Term Bond ETF (BIV) holds US government debt and similar types of high-quality fixed income. Here are some of the key points or criteria for choosing the best high-yield bond funds: Since there is no one-size-fits-all high-yield bond fund, we highlight ten standouts that can be a fine addition to complement a diversified portfolio. DWS.com. "FIDELITY HIGH YIELD FACTOR ETF," Accessed April 14, 2020. M utual funds that seek to provide impressive returns by investing in below investment-grade bonds, also known as junk bonds, are generally known as high yield bond mutual funds. After overall returns of 15% in 2019, the average yield on junk bonds ended the year at about 5%. AGGY is a mix of government, corporate and securitized bonds. 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