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Top 3 High-Yield Bonds You Should Consider Buying

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High-yield bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which have weaker financial conditions 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 the 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 high-yield bond mutual funds, namely Fidelity Advisor High Income Advantage Fund Class M (FAHYX - Free Report) , Payden High Income Fund (PYHRX - Free Report) and American Beacon SiM High Yield Opportunities Fund A Class (SHOAX - Free Report) . 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.

Fidelity Advisor High Income Advantage Fund Class M seeks high income along with capital gains by investing in income-producing, lower-quality debt securities, preferred stocks and convertible securities as well as common stocks in troubled or uncertain financial conditions. FAHYX advisors use fundamental analysis factors like financial condition, industry position as well as market and economic conditions to select investments.

Fidelity Advisor High Income Advantage Fund Class M has three-year annualized returns of 4.8%. As of the end of April 2022, FAHYX had 47.78% of its assets invested in Miscellaneous Bonds.

Payden High Income Fund invests most of its net assets in a variety of debt instruments and income-producing securities like corporate debts which are marked below investment grade by at least one of the recognized rating agencies. PYHRX advisor “Payden & Rygel” also chooses to invest based on comparable quality.

Payden High Income Fundhas three-year annualized returns of 3.0%. PYHRX has an expense ratio of 0.59% compared with the category average of 0.95%.

American Beacon SiM High Yield Opportunities Fund A Class seeks current income along with capital appreciation by investing most of its assets along with borrowings, if any, in non-investment grade financial instruments that provide exposure to non-investment grade securities of both domestic and foreign issues, including emerging markets. SHOAX also invests in debt securities irrespective of its maturities period, market capitalization, or ratings.

American Beacon SiM High Yield Opportunities Fund A Class has three-year annualized returns of 3.6%. Brian L. Placzek has been the fund manager of SHOAX since February 2011.

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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