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Diversified Bonds fund seekers should consider taking a look at Putnam Diversified Income Y (PDVYX - Free Report) . PDVYX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify PDVYX in the Diversified Bonds category, an area that is rife with potential choices. Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
Putnam Funds is based in Canton, MA, and is the manager of PDVYX. The Putnam Diversified Income Y made its debut in October of 1998 and PDVYX has managed to accumulate roughly $2.66 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 3.64%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 5.98%, which places it in the top third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of -34.07%, the standard deviation of PDVYX over the past three years is 3.35%. The fund's standard deviation over the past 5 years is 4.92% compared to the category average of -8.62%. This makes the fund more volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For investors who think interest rates will rise, this is an important factor to consider. PDVYX has a modified duration of 1.73, which suggests that the fund will decline 1.73% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.74% means that a $10,000 investment should result in a yearly payout of $474.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. With a beta of -0.16, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PDVYX has a positive alpha of 3.86, which measures performance on a risk-adjusted basis.
Ratings
Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, PDVYX has 42.54% in high quality bonds rated at least 'AA' or higher, while its junk bond component-bonds rated 'BB' or below-is at 41.06%. This means that the fund has an average quality of A, and focuses on high quality securities.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PDVYX is a no load fund. It has an expense ratio of 0.36% compared to the category average of 3.91%. From a cost perspective, PDVYX is actually cheaper than its peers.
This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.
Bottom Line
Overall, Putnam Diversified Income Y ( PDVYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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Is PDVYX a Strong Bond Fund Right Now?
Diversified Bonds fund seekers should consider taking a look at Putnam Diversified Income Y (PDVYX - Free Report) . PDVYX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify PDVYX in the Diversified Bonds category, an area that is rife with potential choices. Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
Putnam Funds is based in Canton, MA, and is the manager of PDVYX. The Putnam Diversified Income Y made its debut in October of 1998 and PDVYX has managed to accumulate roughly $2.66 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 3.64%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 5.98%, which places it in the top third during this time-frame.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of -34.07%, the standard deviation of PDVYX over the past three years is 3.35%. The fund's standard deviation over the past 5 years is 4.92% compared to the category average of -8.62%. This makes the fund more volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For investors who think interest rates will rise, this is an important factor to consider. PDVYX has a modified duration of 1.73, which suggests that the fund will decline 1.73% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.74% means that a $10,000 investment should result in a yearly payout of $474.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. With a beta of -0.16, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PDVYX has a positive alpha of 3.86, which measures performance on a risk-adjusted basis.
Ratings
Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, PDVYX has 42.54% in high quality bonds rated at least 'AA' or higher, while its junk bond component-bonds rated 'BB' or below-is at 41.06%. This means that the fund has an average quality of A, and focuses on high quality securities.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PDVYX is a no load fund. It has an expense ratio of 0.36% compared to the category average of 3.91%. From a cost perspective, PDVYX is actually cheaper than its peers.
This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.
Bottom Line
Overall, Putnam Diversified Income Y ( PDVYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.