Best High Yield Bond Funds: Taxable Bond Funds Category
Winner: RidgeWorth High Income Fund (STHTX) – Our top pick for the best high yield bond fund for 2013 and beyond is the RidgeWorth High Income Fund (STHTX). With less than $1 Billion under management, it is much smaller than more popular rivals like the Vanguard High Yield Fund at $17 Billion. In our opinion its size is an advantage that will enable it to find opportunities that fly below the radar of its larger peers. We are surprised that the fund is not more widely known as it is one of the top 10 best performing high yield funds over the last 3, 5 and 10 year periods. With no sales load and a .71% management fee, the fund is also on the lower end in terms of fees for the high yield space. The fund’s ability to remain nimble in this less liquid segment of the bond market, combined with the fact that its manager Bryan Nold has been with the fund since 2006, should lead to continued outperformance in the future.
Read our free rating report on the Delaware High Yield Opportunities fund (DHOIX) here.
Best High Yield Bond Funds: Short Duration Taxable Bond Fund Category
Winner: Lord Abbett Short Duration Bond Fund (LDLFX) – While the Lord Abbett Short Duration Bond fund doesn’t have high yield in its name, it has generated its outsized returns by investing higher credit risk bonds. It wasn’t always that way however, as the Lord Abbett Short Duration bond fund began its life as a short term government bond fund. In fact it stayed just that from its inception in 1993 until 2007 when it started investing in higher risk credits. The move has been good for Lord Abbett and this fund’s investors as the fund has significantly outperformed since that time and assets under management have exploded.
Read our free rating report on the Lord Abbett Short Duration Bond Fund (LDLFX) here.
Best High Yield Bond Funds: Municipal Bond Fund Category
Winner: Delaware National High Yield Municipal Bond fund (DVHIX) – Delaware Investments has landed two funds on our best high yield bond funds list, and for good reason. Like the taxable high yield bond fund from Delaware listed above, the Delaware National High Yield Municipal Bond Fund has been crushing the competition for years. It has outperformed the average fund in its category over the last 1, 3, 5, and 10 year time frames. Its performance is especially impressive over the last 10 years, where it has outperformed the average high yield municipal bond fund by 2.89% on average. Keep in mind that is before taxes as well, giving investors in the higher tax brackets some significant extra kick.
If you decide to invest in this fund, make sure you get the DVHIX share class, which comes with no load. Its available from Fidelity with a $2500 minimum. This particular share class has only been around since 2008, but the fund has been around for more than 10 years.
Read our free rating report on the Delaware National High Yield Municipal Bond Fund here.Want to learn how to generate more income from your portfolio so you can live better? Get our free guide to income investing here.