Bond Funds -- American Style

If you're looking for bond funds you may want to do it American style -- American Funds, that is.

The company best known for the largest stock fund in the world -- its $147 billion ( AGTHX Quote)Growth Fund of America behemoth -- is also one of the best places to put your money when looking for a bond play.

Every month TheStreet.com Ratings analyzes 5,000 bond funds and generates a top 200 list that highlights the best-rated and best-performing funds. Our latest list is dominated by the Capital Research & Management-owned American Funds family.

For the full year 2006, the breakdown of this list by asset class shows that two of the most prominent types of funds are corporate high-yield funds and general investment-grade funds.

With these two options, investors can choose, according to their own risk tolerances and risk/return criteria, whether they want to chase higher yields and higher risk via the Corporate High Yield market or reduce the level of risk by investing in investment grade bonds. A combination of both types of funds is also an option.

Below is a table highlighting the corporate high-yield funds that made our top 200 list. All funds in both tables are rated A plus by our models.

Corporate High-Yield Funds (Ranked by 1-year Return)
Fund	Ticker	1-Year Return (%)	6-Month Return (%)	3-Month Return (%)	Dividend Yield (%)
American Funds High Income Tr R5	RITFX	12.45	8.36	4.78	7.53
American Funds High Income Tr 529F	CITFX	12.35	8.31	4.75	7.44
American Funds High Income Tr A	AHITX	12.19	8.24	4.71	7.03
American Funds High Income Tr F	AHTFX	12.16	8.22	4.71	7.28
American Funds High Income Tr 529A	CITAX	12.13	8.21	4.7	6.98
American Funds High Income Tr R4	RITEX	12.12	8.2	4.7	7.24
American Funds High Income Tr 529E	CITEX	11.8	8.04	4.62	6.96
American Funds High Income Tr R3	RITCX	11.76	8.01	4.61	6.93
American Funds High Income Tr B	AHTBX	11.34	7.81	4.51	6.55
BlackRock High Yield Bond Svc	BHYSX	11.33	8.32	4.48	7.06

Our table for general investment-grade funds is below. Notice that the dividend yield and short-term returns of these funds are notably lower than the corporate high-yield market. This is, however, in line with the standard risk/return tradeoff.

General Investment-Grade Funds (Ranked by 1-year Return)
Fund	Ticker	1-Year Return (%)	6-Month Return (%)	3-Month Return (%)	Dividend Yield (%)
American Beacon Hi-Yld Bd PlanAhd	AHYPX	9.46	6.36	3.63	7.31
American Funds Bnd Fd of Amer R5	RBFFX	6.17	5.59	1.99	5.19
American Funds Bnd Fd of Amer 529F	CFAFX	6.05	5.53	1.96	5.08
American Funds Bnd Fd of Amer F	BFAFX	5.9	5.45	1.92	4.94
American Funds Bnd Fd of Amer A	ABNDX	5.88	5.44	1.91	4.73
American Funds Bnd Fd of Amer R4	RBFEX	5.86	5.42	1.91	4.9
American Funds Bnd Fd of Amer 529A	CFAAX	5.84	5.42	1.9	4.7
American Funds Bnd Fd of Amer 529E	CFAEX	5.52	5.25	1.82	4.59
American Funds Bnd Fd of Amer R3	RBFCX	5.49	5.24	1.82	4.55
Atlas American Enterprise Bond Fd	ATAEX	5.2	5.44	1.58	4.82