For safety-first investors, U.S. government-issued Treasury bonds, agency mortgage-backed securities and investment-grade corporate bonds are common choices. While the issuers…
For safety-first investors, U.S. government-issued Treasury bonds, agency mortgage-backed securities and investment-grade corporate bonds are common choices.
While the issuers may vary, these bonds all share a key trait: a relatively low risk of default. That means there’s a good chance you’ll receive your interest payments on time and get your principal back at maturity.
But investors who are comfortable taking on more risk in exchange for higher income can move farther down the credit spectrum. Bonds rated below the BBB- or Baa3 tier are considered high yield, also known as non-investment-grade or “junk” bonds.
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These represent loans to companies that are less creditworthy and, like lending money to a friend with shaky finances, you’d likely want a higher interest rate to take on the risk that they might not pay you back on time, or at all.
High-yield bonds therefore offer better returns than their safer counterparts, but they’re not a free lunch. The extra income compensates you for the real possibility of default, a risk that becomes especially obvious during market crises like 2008, when junk bond indexes fell nearly as much as stocks.
Still, much of this risk can be reduced through diversification. Just like stock funds spread out exposure, high-yield bond funds pool together a wide mix of issuers to help cushion the blow if one company runs into trouble.
“I think retail investors should generally access high-yield bonds through a pooled investment vehicle like a mutual fund or ETF,” says Michael Wagner, co-founder and chief operating officer at Omnia Family Wealth. “It’s very difficult for a regular retail investor to analyze the high-yield bond market, and you really have to do a lot of due diligence and credit-risk analysis on these companies as if you were a bank making a loan to them.”
Here are seven of the best high-yield bond mutual funds and exchange-traded funds (ETFs) to buy now:
| Fund | Expense ratio | 30-day SEC yield |
| Vanguard High-Yield Corporate Fund Investor Shares (ticker: VWEHX) | 0.22% | 6.2% |
| Fidelity Short Duration High Income Fund (FSAHX) | 0.71% | 6.6% |
| Schwab High Yield Bond ETF (SCYB) | 0.03% | 7.3% |
| Invesco Senior Loan ETF (BKLN) | 0.65% | 6.7% |
| Invesco AAA CLO Floating Rate Note ETF (ICLO) | 0.20% | 5.6% |
| BondBloxx CCC Rated USD High Yield Corporate Bond ETF (XCCC) | 0.40% | 11.5% |
| Xtrackers High Beta High Yield Bond ETF (HYUP) | 0.20% | 8.6% |
Vanguard High-Yield Corporate Fund Investor Shares (VWEHX)
“The bond that you’re buying represents the creditworthiness of whomever you’re lending that money to,” Wagner explains. “A high-yield bond is like making a loan to a company that might have more risk — the risk that you’re not going to be paid back at all.” This mechanic makes diversification extremely important for high-yield bond funds. Diversification can be easily achieved by buying VWEHX.
This active Vanguard bond fund allocates a significant portion of its portfolio to B- and BB-rated junk bonds. It pays a 6.2% 30-day SEC yield, but it isn’t very tax efficient. Like most Vanguard funds, VWEHX is affordable, with a 0.22% expense ratio, but it requires a $3,000 minimum investment. Investors with at least $50,000 to invest can access the Admiral Shares version of VWEHX at a lower 0.12% expense ratio.
Fidelity Short Duration High Income Fund (FSAHX)
Some high-yield bond funds also screen for shorter maturities to reduce interest rate sensitivity. A great example is FSAHX, which attempts to maintain an average duration of three years or less. This fund primarily targets BB- and B-rated bonds, but also has the flexibility to own defaulted bonds, floating-rate loans and even foreign-issued bonds. FSAHX currently pays a 6.6% 30-day SEC yield.
With a 0.71% expense ratio, FSAHX isn’t the cheapest high-yield bond fund. However, on Fidelity’s brokerage platform, this bond fund has no minimum required investment or transaction fees. This fund is generally suitable for investors looking to earn a yield pick-up over investment-grade bond funds while attempting to minimize interest rate sensitivity. However, tax efficiency isn’t the best.
Schwab High Yield Bond ETF (SCYB)
SCYB is one of the most affordable high-yield bond funds on the market. At a 0.03% expense ratio, this ETF rivals longstanding aggregate bond funds in terms of price. It passively tracks the ICE BofA US Cash Pay High Yield Constrained Index, a benchmark of more than 1,800 high-yield bond issues. The majority of SCYB’s holdings have maturities of between three and seven years and a B-to-BB credit rating.
SCYB’s 7.3% 30-day SEC yield is slightly higher than comparable high-yield bond funds of similar credit quality and maturity band. By keeping an expense ratio of just 0.03%, investors who own SCYB keep more of the fund’s returns on the back end. Schwab achieves this by licensing low-cost benchmarks for SCYB to passively track instead of employing active management.
Invesco Senior Loan ETF (BKLN)
A unique type of high-yield bond that sits higher in the capital structure than traditional junk bonds is the bank loan, also called a senior loan or leveraged loan. These are floating-rate loans made to below-investment-grade companies and are typically secured by collateral, meaning investors may have better recovery prospects in a default scenario. These loans can be accessed through ETFs like BKLN.
BKLN tracks the Morningstar LSTA US Leveraged Loan 100 Index for a 0.65% expense ratio. “BKLN provides investors with relatively high income while mitigating their risk to rising rates,” says Justin Danfield, senior fixed income ETF strategist at Invesco. “It is the largest and most liquid leveraged loan ETF, with over $6.7 billion in assets, and currently pays a 30-day SEC yield of 6.7%.”
[READ: 5 Great Fixed-Income Funds to Buy for 2025]
Invesco AAA CLO Floating Rate Note ETF (ICLO)
Senior loans aren’t just packaged into ETFs. In many cases, they’re pooled together to form a collateralized loan obligation, or CLO. CLOs are then sliced into different tranches based on risk level and repayment priority. At the bottom sits the equity tranche, which absorbs the first losses and gets paid last. Above that is the mezzanine tranche, and at the top is the AAA-rated tranche.
When it comes to CLOs, the AAA tranche has the highest credit quality and first claim on cash flows. For exposure specifically to AAA CLO tranches, Invesco offers ICLO. “Invesco’s management team has an average of 30 years of experience and currently manages around $2 billion of CLO notes,” Danfield says. This ETF charges a 0.2% expense ratio and currently pays a 5.6% 30-day SEC yield.
BondBloxx CCC Rated USD High Yield Corporate Bond ETF (XCCC)
“Within the high-yield corporate bond category, income from CCC-rated corporate bonds has averaged 10% annually over the past 20 years,” explains JoAnne Bianco, partner and senior investment strategist at BondBloxx. “XCCC is a precise and efficient way for investors to get access to this segment of the high-yield market.” This ETF tracks the ICE CCC US Cash Pay High Yield Constrained Index.
CCC-rated high-yield bonds are at a much higher risk of default compared to B- and BB-rated ones, and thus XCCC pays a much higher 11.5% 30-day SEC yield to compensate for this risk. In addition, the ETF caps issuer exposure at 2%. “A key strength of XCCC is its broad diversification across industries and issuers, helping reduce the risk of investing in individual high-yield bonds,” Bianco explains.
Xtrackers High Beta High Yield Bond ETF (HYUP)
HYUP is a unique high-yield bond ETF that tracks the Solactive USD High Yield Corporates Total Market High Beta Index. This benchmark prioritizes more volatile bond issuers, which boosts HYUP’s 30-day SEC yield to 8.6%. Costs remain reasonable, with a 0.2% expense ratio, and the ETF remains fairly diversified, with a portfolio of over 600 bonds. As with the previous funds, HYUP pays monthly distributions.
“HYUP could be a powerful addition to investors’ high-yield toolkit, offering a more precise and nuanced way to express views within the high-yield bond asset class,” notes Ben Spalding, head of fixed income, Xtrackers Americas, at DWS Group. “By targeting the higher-yielding half of the U.S. high-yield market, HYUP allows investors to potentially capture greater return as part of a tactical credit strategy.”
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7 of the Best High-Yield Bond Funds to Buy Now originally appeared on usnews.com
Update 06/16/25: This story was previously published at an earlier date and has been updated with new information.