Top 3 High-Yield Bonds to Add Now to Your Portfolio

High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which have a weaker financial condition but benefit as the economy moves north. Though high-yield bonds are more exposed to credit risk, these have less exposure to interest rate risk, making them a differentiated source of return. Despite headwinds faced in the early months of the pandemic, demand for high yield has recovered since the Fed’s rate cut and reopening of the economy. The improving economic activity renewed the search for yield, and given the current scenario, these bonds are poised to grow.

Below we share with you three top-ranked high-yield bond mutual funds, namely Strategic Advisers Fidelity International Fund FUSIX, Manning & Napier High Yield Bond Series MNHYX and American Funds American High-Income Trust Class A AHITX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

Strategic Advisers Fidelity International Fund invests most of its net assets in common stocks of companies located in foreign countries, especially in emerging markets. FUSIX invests indirectly in securities through one or more other funds.

Strategic Advisers Fidelity International Fundhas three-year annualized returns of 8.1%. As of the end of February 2022, FUSIX has 70.70% of its assets invested in Others Investment.

Manning & Napier High Yield Bond Series invests most of its net assets in investment-grade bonds, derivative instruments and exchange-traded funds (ETFs), U.S. dollar-denominated, fixed-income securities issued by U.S. and foreign corporations and governments, including those in emerging markets. MNHYX also invests a portion of its net assets in bank loans, which are, generally, non-investment grade floating rate investments.

Manning & Napier High Yield Bond Serieshas three-year annualized returns of 5.7%. MNHYX has an expense ratio of 0.90% compared with the category average of 0.95%.

American Funds American High-Income Trust Class A seeks current income along with capital appreciation by investing in higher-yielding and lower-quality debt securities (rated Ba1 / BB+ or below by Nationally Recognized Statistical Rating Organizations. AHITX may also invest a portion of its net assets in securities of foreign issuers.

American Funds American High-Income Trust Class Ahas three-year annualized returns of 4.0%. David A. Daigle has been the fund manager of AHITX since December 2003.

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

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