This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

10 Top High-Yield Funds With Low Risk

BOSTON ( TheStreet) -- Investors have poured money into high-yield bond funds at a record pace this year as they seek less-risky alternatives to the volatile stock market while getting better returns than those of other fixed-income securities.

Inflows into high-yield bond mutual funds this year totaled $22 billion through June 8, more than four times during the same period last year, according to EPFR Global. In 2010, inflows were $31.5 billion, shy of the record $31.8 billion in 2009.

Cameron Brandt, director of research for EPFR Global, told TheStreet that new investments in high-yield bond funds "have been driven by the desperation for yield.

And that isn't going to go away," given the miniscule returns now being offered by Treasuries, money-market accounts and certificates of deposits.

Benchmark Treasury securities dropped to less than 3% last week on signs the U.S. economy is weakening. The jobless rate rose in May, and consumer spending is still lackluster as housing prices extend their declines.

Still, recent economic uncertainties have given investors pause. There has been a decline in inflows over the past few weeks and a week of outflows.

There are concerns due to the scheduled expiration of the Federal Reserve's QE2 program at the end of the month and sovereign debt problems boiling in Europe, as well as concerns over the health of the economy at home and its potential impact on high-yield bonds, which used to be known as "junk" bonds.

High-yield bonds have a history of providing much better returns than most other fixed-income investments because of their perceived higher "risk" of default, that is, their ability to continue to make scheduled payments.

But Brandt said junk bond default rates "are still really pretty low, much lower than it was expected they would be," even when the economy struggled over the previous 2 1/2 years.

But it's not all bullish in the sector as several years of strong appreciation for these bonds means they are fully priced and returns are likely to start flattening.

As a rough measure of performance, the SPDR Barclays Capital High Yield Bond Index ETF, an exchange traded index fund, has a current yield of 8.3%, and a total return of 2.4% this year and 16.4% over the past 12 months. It has an average annual return of 7.4% over three years.

The S&P 500 Index is up 2% this year, including a loss of 2% over the past three months. It has risen 19% over 12 months, but flat over the past three years.

What follows is a list of 10 bond funds that have records of producing strong, steady returns and that have received at least three stars out of a possible five from ratings firm Morningstar for their management's performance.

The returns cited include changes in share price and reinvestment of dividends and capital gains, if any.
1 of 6

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
JNK $32.30 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%
GOOG $683.57 0.00%
TSLA $162.60 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs