Here are the best High Yield Bond ETFs. Federated High-Income Bond A Fund, ticker FHIIX, is another popular choice for investors looking for high yields. This fund seeks to track the Markit iBoxx USD Liquid High Yield Index. 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. The offers that appear in this table are from partnerships from which Investopedia receives compensation. High-quality intermediate-term municipal bond funds yield 1% and have the extra benefit of being exempt from federal tax. DWS.com. The next year, it came back with a return of positive 28.74. 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. 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. 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. All figures are as of April 14, 2020. 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. 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). This fund opened in April 2007. The S&P 500 High Beta Index is the most well-known of these indexes. BMO US High Yield Bond Fund is an open-end fund incorporated in Canada. This means that any single default won't be as damaging to your portfolio. Here are two of the best actively-managed, go-anywhere, multi-sector bond funds: Loomis Sayles Bond (LSBRX) 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. Fidelity® Series High Income Fund. HYG was the first high-yield corporate bond fund, and it tracks a market-weighted index of U.S. high-yield corporate debt. 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. Vanguard High Yield Corporate 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 … Seven best bond index funds to buy:-- Fidelity U.S. The emerging markets bond index (EMBI) is a benchmark index for measuring the total return performance of international government bonds by emerging markets. Before buying high-yield bond funds, or any other investment, there are a handful of considerations to make during the research and analysis. "Metropolitan West High Yield Bond M," Accessed April 15, 2020. Best High-Yield Bond Funds: Vanguard High-Yield Corporate Fund (VWEHX) Expense Ratio: 0.23% per year, or $23 on a $10,000 investment. 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. ... high-yield closed-end funds can pay out a lot more. Fidelity Investments. Only one open-end, or mutual, fund makes the list of low-cost products: Vanguard High-Yield Corporate. The Best Credit Cards Of 2020. 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. Goldman Sachs Access Hi Yld Corp Bd ETF. We also reference original research from other reputable publishers where appropriate. These include white papers, government data, original reporting, and interviews with industry experts. 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. High-yield or “junk” bond funds. Investors striving for high-credit quality and improved returns over typical index funds might consider this WisdomTree bond fund offering. Xtrackers USD High Yield Corp Bd ETF. "Solactive USD High Yield Corporates Total Market Low Beta Index – ETF Tracker," Accessed April 14, 2020. Among bond funds, some of the largest are passively managed ETFs — and that is true when it comes to high-yield bond funds, too. iShares Broad USD High Yield Corp Bd ETF. 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. TCW High Yield Bond Fund. After overall returns of 15% in 2019, the average yield on junk bonds ended the year at about 5%. ... 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: … Some actively-managed bond funds are categorized as "multi-sector" bond funds because they hold several different types of bonds, including the riskier high-yield bonds and foreign bonds. RBC BlueBay High Yield Bond Fund. On top of this, most of the funds Goldstein owns in the fund pay high dividend yields. The fund has more than 7 billion in assets and is managed by Charlie McCarthy. … A high beta index is a basket of stocks that exhibit greater volatility than a broader market index like the S&P 500. He is a Certified Financial Planner, investment advisor, and writer. 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. Kent Thune is the mutual funds and investing expert at The Balance. Diversification is an investment strategy based on the premise that a portfolio with different asset types will perform better than one with few. Bond funds can help to lower this risk by allowing you to easily own a broad portfolio of high-yield bonds. Think of a personal credit score. This is obviously not your typical sedate bond fund. As treasury yields fall, high-yield bonds can seem increasingly attractive. 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. A bond can receive a lower credit rating because of the risk of default on the part of the entity issuing the bond. Past performance is not indicative of future results. Similarly, funds not open to new investors and those with a minimum investment of more than $10,000 were excluded. 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. Vanguard Long-Term Investment-grade Fund Investor Shares (VWESX) This fund contains high and … JNK – SPDR Barclays High Yield Bond ETF 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. "FIDELITY HIGH YIELD FACTOR ETF," Accessed April 14, 2020. Holdings include up to 20% high-yield bonds, plus U.S. Treasurys, mortgage-backed securities and corporates, among other securities. 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. The Vanguard Intermediate-Term Bond ETF (BIV) holds US government debt and similar types of high-quality fixed income. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) The current yield for this fund is 6.27%, and the expense ratio for the fund is low at 0.58%. The iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is the most popular high yield bond fund, with over $30 billion in assets. TCW.com. "Low Beta High Yield Bond ETF," Accessed April 14, 2020. ETFDB.com. There are other qualities to consider when looking for the best funds to buy. The 12-month yield is 2.6%, although the current stated yield is 1.21%. Because of that, the Special Opportunities Fund currently yields over 9%. All figures are as of April 14, 2020. Average recent yield: 2.2%. Here are the best High Yield Bond funds. When searching for high-yield bond funds, just be sure that you're not only looking for the highest yields. You should NEVER invest your money with a fund manager for the long term. If you want to build a diversified portfolio of income-generating investments, you'll need high-yield bond funds to complement your dividend funds. One of the best high yield corporate bond funds for a number of investors is the BlackRock High Yield Bond Fund, symbol BRHYX. The ETF has a weighted average maturity of roughly 4 years and an expense ratio of 0.49%. Below we share with you four top-ranked high-yield bond mutual funds. Best Municipal Bond Fund: Vanguard High Yield Tax Exempt Fund (VWAHX) Its first full year in operation, 2008 (a bad year for corporate high-yield bonds), the fund lost 17.19 percent. Investing involves risk including the possible loss of principal. 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. These bonds are defined as securities with credit ratings less than BB. Fidelity Short Duration High Income (FSAHX): Investors wanting high yields but low-interest rate risk … 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. 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. 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. AGGY is a mix of government, corporate and securitized bonds. However, high-yield bonds carry a higher risk of default than investment grade corporate bonds and treasurys. 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 portfolios concentrate on lower-quality bonds, which are riskier than those of higher- quality companies. Also known as junk bonds, high-yield bonds are bonds that pay higher yields because of low relative credit ratings. Fidelity Capital & Income Fund (FAGIX) Created in 1977, the Fidelity Capital & Income Fund invests … High Yield Bond Funds. the low end of the credit quality spectrum). Vanguard High-Yield Corporate Fund (VWEXH) Contact: 800-662-7447; Vanguard The best-performing high-yield corporate bond fund, based on performance over the past year, is the Metropolitan West High Yield Bond Fund (MWHYX). Top holdings are the securities with the greatest market value weight in a portfolio. You can learn more about the standards we follow in producing accurate, unbiased content in our. Borrowers with poor (lower) credit scores generally pay higher interest rates on their loans or credit card balances than the borrowers with good or excellent credit. Corporate bonds with high credit quality are considered investment-grade bonds, and those below investment grade are considered high-yield ("junk") bonds. "MetWest High Yield Bond Fund - M Share MWHYX," Accessed April 14, 2020. 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. Bond Index Fund 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 fund’s expense ratio is 0.36%. 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. PIMCO Active Bond ETF ( BOND ) A debt fund is an investment pool, such as a mutual fund or exchange-traded fund, in which core holdings are fixed income investments. As compared with investment-grade bonds, high-yield corporate bonds offer higher interest rates because they have lower credit ratings. Investopedia requires writers to use primary sources to support their work. 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. 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? It's the same concept with the issuing entities of bonds, which can be corporations, publicly-owned utilities, and state, local and federal governments. AAA is highest). Morningstar. 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