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Is RPSIX a Strong Bond Fund Right Now?

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Having trouble finding a Diversified Bonds fund? T. Rowe Price Spectrum Income (RPSIX - Free Report) is a possible starting point. RPSIX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify RPSIX 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

RPSIX is a part of the T. Rowe Price family of funds, a company based out of Baltimore, MD. T. Rowe Price Spectrum Income made its debut in June of 1990, and since then, RPSIX has accumulated about $6.89 billion in assets, per the most up-to-date date available. Charles Shriver is the fund's current manager and has held that role since May of 2011.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 5.13%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.94%, which places it in the middle 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. Over the past three years, RPSIX's standard deviation comes in at 6.96%, compared to the category average of 7.6%. The standard deviation of the fund over the past 5 years is 5.64% compared to the category average of 6.36%. This makes the fund less volatile than its peers over the past half-decade.

With a beta of 0.68, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, RPSIX has a positive alpha of 2.7, 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, RPSIX has 31.42% in high quality bonds rated at least 'AA' or higher, while 29.27% are of medium quality, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 34.02%, giving RPSIX an average quality of A. This means that it focuses on high quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, RPSIX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 0.86%. RPSIX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.

Bottom Line

Overall, T. Rowe Price Spectrum Income ( RPSIX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, T. Rowe Price Spectrum Income ( RPSIX ) looks like a somewhat average choice for investors right now.

For additional information on the Diversified Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into RPSIX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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