Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund’s fortunes.
Below we will share with you 5 top rated diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.
Baird Core Plus Bond Investor (BCOSX - Free Report) seeks annual rate of return more than that of the Barclays U.S. Universal Bond Index. The fund invests a lions share of its assets in U.S. dollar-denominated debt securities including U.S. government, mortgage-backed domestic and foreign issuers, and corporate debt of both U.S. and non-U.S. issuers. It generally invests in investment-grade debt securities, but may also invest a maximum 20% of its assets in non-investment-grade debt securities like “high yield” bonds. The diversified bond mutual fund returned 6.6% in the last one year period.
The diversified bond mutual fund has an expense ratio of 0.55% compared to a category average of 0.86%.
Spirit of America Income A (SOAIX - Free Report) invests major portion of its assets in taxable municipal bonds, income generating convertible securities, high yield domestic corporate bonds, preferred stocks and CMO’s. The fund may invest in U.S. government agency securities issued or guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. It may also invest in MLPs. The diversified bond mutual fund returned 15.1% in the last one year period.
As of November 2014, this diversified bond mutual fund held 283 issues, with 2.25% of its total assets invested in Tobacco Settlement Fing Corp V As 6.706%.
Wells Fargo Advantage Diversified Income Builder A (EKSAX - Free Report) seeks long-term capital appreciation along with current income. The fund diversifies its portfolio by investing a large portion of its assets in both domestic and foreign securities. It primarily invests in corporate debt securities having junk ratings. It allocates 70-90% of its assets in debt securities and invests a maximum of 30% of its assets in equity securities. The diversified bond mutual fund returned 5.4% in the last one year period.
Margaret Patel is the fund manager and she has managed this diversified bond mutual fund since 2007.
PIMCO Investment Grade Corporate Bond A (PBDAX - Free Report) invests a lions share of its assets in investment grade debt securities of varying maturities that may be represented by derivative instruments. It may invest a maximum of 15% of its total assets in junk bonds, rated B or higher by Moody's. The diversified bond mutual fund returned 8.6% in the last one year period.
As of September 2014, this diversified bond mutual fund held 1075 issues, with 15.89% of its total assets invested in 10 Year US Treasury Note Future Dec14.
T. Rowe Price Spectrum Income Fund (RPSIX - Free Report) seeks high level of current income. The fund generally invests in domestic and foreign bond funds, money market funds, and an income-oriented stock fund. The fund may invest in funds holding high-quality U.S. and non-U.S. bonds. It broadly diversifies its assets among T. Rowe Price mutual funds from specific market sections. The diversified bond mutual fund returned 3.4% in the last one year period.
Charles M. Shriver is the fund manager and has managed this diversified bond mutual fund since 2011.
To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund Rank at https://www.zacks.com/funds.