For investors seeking the best-performing high-yield bond ETFs, here are 10 to consider. Pacer ETFs. There's one primary drawback of high-yield ETFs, however. "First Trust Preferred Securities and Income ETF (FPE)." High-yield bonds can be an attractive vehicle for investors because they pay higher interest rates than investment-grade bonds. The term "high-yield funds" generally refers to mutual funds or exchange-traded funds (ETFs) that hold stocks that pay above-average dividends, bonds with above-average interest payments, or a combination of both. MLP funds invest in master limited partnerships, which typically focus on energy-related industries. The expense ratios of MLP funds can be high and sometimes difficult to understand, and these funds probably are best for investors looking for high yields, often as high as 7% or more. Fallen Angels USD Bond ETF (FALN), VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL), Barclays US High Yield Fallen Angel 3% Capped Index – ETF Tracker, BofA Merrill Lynch US Fallen Angel High Yield Index – ETF Tracker, VanEck Vectors Fallen Angel High Yield Bond ETF. What Are Junk Bonds and How are Junk Bonds Rated? 4  As the ticker symbol suggests, JNK invests in bonds with credit quality below investment grade. The Balance does not provide tax, investment, or financial services and advice. All numbers below are as of November 17, 2020., FALN focuses on high-yield bonds across all durations and from developed markets. Accessed Nov. 17, 2020. Accessed May 20, 2020. "Vanguard Emerging Markets Government Bond ETF (VWOB)." As of May 2020, the SEC Yield for HYD is 5.01% and the expense ratio is 0.35%.. Investors who are interested in higher current income and have a high tolerance for risk are best suited for this particular industry. "VanEck Vectors Fallen Angel High Yield Bond ETF." The numbers are similar for XHY. Vanguard. State Street Global Advisors. Accessed Nov. 17, 2020. The management team looks for income securities, such as corporate bonds at or below investment grade, preferred stocks, and convertible securities. Compare the best Bond ETFs 2020 at a glance. Peritus High Yield ETF (HYLD), 1.35% PIMCO Global Advantage Inflation-Linked Bond Strategy Fund (ILB), 0.60% WisdomTree Emerging Markets Corporate Bond Fund (EMCB), 0.60% BulletShares® High Yield ETFs The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods. "Vanguard High Dividend Yield ETF (VYM)." A Beginner Investor's Guide to Understanding Dividend Yield, You Only Need These 7 Vanguard ETFs to Build a Complete Portfolio, iShares iBoxx $ High-Yield Corporate Bond (HYG), SPDR Bloomberg Barclays High-Yield Bond (JNK), VanEck Vectors High-Yield Municipal Index (HYD), WisdomTree Emerging Markets High Dividend Fund (DEM), SPDR Dow Jones International Real Estate (RWX), First Trust Preferred Securities and Income (FPE), Invesco KBW High Dividend Yield Financial Portfolio (KBWD), Vanguard Emerging Markets Government Bond (VWOB), iShares iBoxx $ High Yield Corporate Bond ETF, SPDR Bloomberg Barclays High Yield Bond ETF, HYD VanEck Vectors High-Yield Municipal Index ETF, Investor Bulletin: Real Estate Investment Trusts (REITs), SPDR Dow Jones International Real Estate ETF, First Trust Preferred Securities and Income ETF (FPE), Invesco KBW High Dividend Yield Financial ETF, Vanguard Emerging Markets Government Bond ETF (VWOB). If you want to add one of the most widely traded high-yield ETFs on the market, iShares iBoxx $ High-Yield Corporate Bond ETF (NYSEARCA: HYG). A floating rate fund invests in bonds and debt instruments whose interest payments fluctuate with an underlying interest rate level. High-yield bonds underperformed the broader market over the past year. Accessed Nov. 17, 2020. Fallen Angels USD Bond ETF . iShares Broad USD High Yield Corp Bd ETF. First Trust. Here are three of the best-performing high-yield bond ETFs thus far this year. Accessed May 20, 2020. ETFdb.com. The fund tracks the Barclays U.S. High Yield Fallen Angel 3% Capped Index, an index targeting so-called "fallen angel" bonds which were previously investment grade but have been downgraded to junk status as a result of the weakening of the issuer. Businesses suffering as a result of the COVID-19 pandemic have led to new fallen angel bonds across industries. "iShares iBoxx $ High Yield Corporate Bond ETF." VanEck. Investors should keep in mind that high-yield funds often invest in bonds with low credit quality. This is a list of all US-traded ETFs that are currently included in the High Yield Bonds … He is a Certified Financial Planner, investment advisor, and writer. Accessed May 20, 2020. Long-term investors typically look for growth in their portfolios over time, and most investors seeking high-yield funds are retired investors looking for income from their investments. A floating rate fund is a fund that invests in financial instruments paying a variable or floating interest rate. One of the things that makes high-yield bond ETFs popular is their high income. As of April 2020, the SEC Yield for KBWD is high at 12.76% and the expense ratio is also high at 1.58%.. Accessed May 20, 2020. When interest rates are rising, long-term bonds will generally fall more in price than short- and intermediate-term bonds. "HYD VanEck Vectors High-Yield Municipal Index ETF." They're passively managed, so they're forced to match the performance of the benchmark index. "Invesco KBW High Dividend Yield Financial ETF." Accessed May 20, 2020. This ETF tracks the FTSE High Dividend Yield Index, which consists of about 400 stocks of mostly large-cap companies that pay above-average dividends to investors. 10 High-Yield ETFs That Stand Above the Rest, High-Yield ETFs vs. "Alerian MLP ETF." The expense ratio is 0.85%, which is low for an MLP fund., Investors looking to diversify their high-yield holdings with foreign stocks, specifically emerging markets, might want to check out DEM. Peritus High Yield ETF (HYLD) is another example of how a yield chase can lead an ETF into low quality and underperformance. The fund management team attempts to find and hold the highest paying dividend stocks available in emerging markets. The largest Junk Bond ETF is the iShares iBoxx USD High Yield Corporate Bond ETF HYG with $25.93B in assets. Select Real Estate Securities Index, which consists of non-U.S. REITs and other real estate securities. There are 41 distinct high-yield bond ETFs that trade in the U.S., excluding inverse and leveraged ETFs, as well as funds with less than $50 million in assets under management (AUM). Kent Thune is the mutual funds and investing expert at The Balance. Best High-Yield Funds for 2019: iShares iBoxx $ High-Yield Corporate Bond ETF (HYG) 12-Month Yield: 5.3% Expenses: 0.49% If you want to add one of the most widely traded high-yield … Investors who want to find yield with a low-cost ETF that invests in emerging markets bonds will like what they see in Vanguard's VWOB. Fidelity. Here are the best High Yield Bond ETFs. REITs usually have at least 100 shareholders, and they're legally required to pay out at least 90% of their income to shareholders., RWX tracks the Dow Jones Global ex-U.S. Investors seeking to benefit from the higher interest payouts of high-yield bonds while controlling some of the risk through diversification can invest in a basket of high-yield bonds contained in exchange traded funds (ETFs). The primary advantages of high-yield ETFs over high-yield mutual funds are low fees, diversification, and intraday liquidity. There is a variety of high-yield ETFs on the market compared to high-yield mutual funds. The top holdings of FALN include high-yield bonds for Carnival Corp. (CCL), a British-American cruise operator; and high-yield bonds of two different sets of maturities for Sprint Capital Corp., a wireless telecommunications company, which was recently acquired by T-Mobile., ANGL tracks the BofA Merrill Lynch U.S. On the other hand, high-yield bonds (alternately known as "junk" bonds) also carry a greater chance of defaulting than investment-grade bonds, making them a riskier addition to a portfolio. SPDR Bloomberg Barclays High Yield Bond ETF (JNK). ETFdb.com. We also reference original research from other reputable publishers where appropriate. The best-performing high-yield bond ETF, based on performance over the past year, is the iShares U.S. Vanguard. We examine the 3 best high-yield bond ETFs below. Susan Dziubinski. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years. BulletShares High Yield ETFs The values of junk bonds fluctuate more than those of high quality bonds and can decline significantly over short time periods. High-Yield Mutual Funds, Use Caution When Investing in High-Yield Funds, These Bond Funds Are the Best for High Yield Investing, These Types of ETFs Are Best for Roth IRAs, Consider Floating-Rate Bonds as an Investment, A List of the Top Dividend Funds for All Stages of an Investor's Life, The Best Mutual Funds and ETFs That Invest in Health Stocks, Find Out About ETF Investing Strategies to Diversify Your Portfolio, These Fidelity Funds Produce High Dividends, These Are the Best Types of Funds for 401(k) Plans. The SEC Yield is 4.19% and the expense ratio is 0.59% as of May 2020., This fund is a rare breed in that it's one of just a handful of ETFs that are actively managed. SPDR Barclays High Yield Bond ETF (JNK) 7. Vanguard High-Yield Corporate Investor (VWEHX, $5.94), another Kip 25 selection, is one of the best bond funds for retirement investors who are seeking higher levels of … Xtrackers USD High Yield Corp Bd ETF. Bond Index, which uses a trend-following strategy to alternate exposure between the S&P U.S. High Yield Corporate Bond Index and the S&P U.S. Treasury Bond 7-10 Year Index. Unlike the other two funds above, this ETF is neither primarily focused on fallen angels nor on high-yield bonds. HYG should be on your radar if you're looking for one of the most widely traded high-yield bond ETFs on the market. That said, this diverse selection of funds should suit a variety of investing needs. Whether you're investing in high-yield mutual funds or high-yield ETFs, it's smart to have a clear purpose in mind for buying these income-oriented investments. Accessed Nov. 17, 2020. Once the 0.62% management fee is subtracted, investors are left with a substantial 5.71%. YCharts. High-yield bonds, as measured by the Bloomberg Barclays U.S. Corporate High Yield Bond Index, have underperformed the broader market. "SPDR Dow Jones International Real Estate ETF." Accessed Nov. 17, 2020. Accessed May 20, 2020. Accessed Nov. 17, 2020. Should You Invest in Broad Market Index Funds? ETFdb.com. The SEC yield for VWOB was 5.26% as of May 2020, and the expense ratio is 0.25%.. "ETF Screener." Prospective shareholders should take note that this ETF focuses on small- and mid-cap stocks, which is not typical of most dividend funds—they often hold large-cap stocks. When interest rates are rising, bond prices are generally falling, and the longer the maturity, the greater the sensitivity. The portfolio consists primarily of corporate bonds with maturities between three and 10 years, and with credit quality below investment grade (a rating below BBB by Standard & Poor's or below Baa by Moody's credit rating agencies). 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