3 High-Yield Funds For Spectacular Returns In 2021

Image: Bigstock

The coronavirus pandemic injected sudden volatility into global financial markets and rattled asset prices last year. In fact, asset prices went for the most jarring rollercoaster ride since the great financial crisis in 2008. In an attempt to save the economy, the government took several actions that included providing fiscal stimulus and interest rate cut by the Federal Reserve to near zero to reduce the cost of credit and improve liquidity for borrowers.

While the Fed intends to keep interest rate at near-zero through 2023, high-yield bonds can be a good bet for income-seeking investors in 2021. Higher-yielding funds help investors reach their fixed income goals, which is a prime concern during this volatility. These bonds, unlike investment-grade bonds, respond well during periods of strong economic growth. With vaccines rolling out and the Biden administration promising further fiscal stimulus to boost the economy, markets are poised to grow.

High-yielding bonds behave more like stocks than investment-grade bonds. These bonds have significant holdings in smaller companies, which are considered to have weaker financial condition but benefits 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 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.

3 Funds to Buy

We have shortlisted three high-yield mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to grow. Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform their peers in the future.

1 2
View single page >> |

Disclaimer: Neither Zacks Investment Research, Inc. nor its Information Providers can guarantee the accuracy, completeness, timeliness, or correct sequencing of any of the Information on the Web ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.