Top 10 high-yield bonds to maximize your returns
High-yield bonds, commonly known as ‘junk bonds’, offer higher interest rates than investment-grade bonds due to their elevated risk of default. These bonds are appealing to investors seeking higher returns, but they come with increased risk. However, with careful selection and diversification, high-yield bonds can play a valuable role in a well-rounded investment portfolio. Below are 10 high-yield bonds to consider in 2024
1. American Funds American High-Income Trust Class F-1 (AHTFX)
The American High-Income Trust is one of the top high-yield bonds that focuses on high-yield corporate bonds as well as income-producing securities. With a relatively low expense ratio of 0.73%, this fund targets high current income, and secondarily, capital appreciation. Its well-diversified portfolio reduces the impact of potential defaults, making it a robust option for those seeking high yields with managed risk.
2. Fidelity Floating Rate High Income Fund (FFRHX)
The Fidelity Floating Rate High Income Fund primarily invests in floating-rate loans and other floating-rate securities, offering a safeguard against rising interest rates. With an expense ratio of 0.68%, it balances high yield with lower interest rate sensitivity, making it a suitable choice for income-focused investors looking to mitigate rate risk.
3. Fidelity Capital & Income Fund (FAGIX)
The Fidelity Capital & Income Fund offers a diverse mix of high-yield bonds, convertible securities, and equities. With an expense ratio of 0.93%, this fund is designed to provide both high current income and capital growth. It’s ideal for investors who seek a diversified approach to high-yield investments while aiming for income and growth.
4. American Funds Emerging Markets Bond Fund Class F-1 (EBNEX)
This fund provides exposure to high-yield bonds in emerging markets, regions known for their growth potential. With an expense ratio of 0.94%, it offers a unique opportunity for investors willing to accept additional risk for the potential of higher returns in developing economies.
5. T. Rowe Price Credit Opportunities Fund (PRCPX)
The T. Rowe Price Credit Opportunities Fund is a well-managed option for those seeking exposure to high-yield corporate bonds and other credit instruments. With an expense ratio of 0.81%, it focuses on delivering high current income and capital appreciation through a diversified portfolio, making it an attractive choice for investors who prioritize expert management.
6. American Century High Income Fund Investor Class (AHIVX)
The American Century High Income Fund invests in high-yield corporate bonds and other income-producing securities. With an expense ratio of 0.78%, the fund aims to provide high current income along with capital appreciation. Its broad diversification helps minimize the risk of significant losses, offering a balance of income and safety.
7. Northern Multi-Manager High Yield Opportunity Fund (NMHYX)
This fund employs a multi-manager strategy to invest in a diversified portfolio of high-yield bonds. With an expense ratio of 0.68%, it seeks to deliver high current income and capital appreciation. The multi-manager approach allows investors to benefit from different perspectives and strategies within the high-yield market.
8. Touchstone Ares Credit Opportunities Fund Class Y (TMAYX)
Managed by Ares Management, a leader in the high-yield space, this fund focuses on high-yield corporate bonds and other credit instruments. With an expense ratio of 0.88%, it aims to provide high current income and capital appreciation, making it an appealing option for those seeking exposure to a well-regarded management team in the high-yield market.
9. Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
Vanguard’s High-Yield Corporate Fund is known for its low-cost structure, boasting an expense ratio of just 0.22%. It invests in a diversified portfolio of high-yield corporate bonds, targeting high current income and capital appreciation. Vanguard’s reputation for cost-efficiency makes this fund an attractive choice for cost-conscious investors.
10. T. Rowe Price Intermediate Tax-Free High Yield Fund (PRIHX)
Focusing on high-yield municipal bonds, this fund offers tax-free income, making it ideal for investors in higher tax brackets. With an expense ratio of 0.46%, it aims to deliver high current income exempt from federal taxes. This fund is a great option for those looking for tax-efficient income in the high-yield space.
Conclusion
High-yield bonds can be a lucrative option for investors who are prepared to embrace higher risks for potentially higher returns. The funds listed above offer a variety of strategies, from corporate bonds to emerging market debt and tax-free municipal bonds. Diversifying across these high-yield funds allows investors to manage risk while still pursuing attractive returns.
By carefully selecting and balancing investments in these right high-yield bonds, investors can enhance their portfolios, optimizing both income and growth potential. As always, it’s important to assess your risk tolerance and consult with a financial advisor to ensure these investments align with your financial goals.
