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3 Short-Term Government Bond to Beat Volatile Market Conditions

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Mutual funds investing in debt securities are among the most secure investment options, which provide regular income while protecting the capital invested. Funds that are part of this category bring a great deal of stability to portfolios with a large proportion of equity, while providing dividends more frequently than individual bonds. U.S. government bond funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered the safest in the bond fund category and are ideal for risk-averse investors.

Meanwhile, a short-term government bond fund is a mutual fund that is limited by its investment objectives and fund by laws to investing primarily in short-term obligations of the federal government or its agencies. Depending on the fund's definition, the short term can be up to five years.

Below, we share with you three short-term government bond mutual funds, viz. PGIM Short Duration High Yield Income Fund (HYSAX - Free Report) , GMO U.S. Treasury Fund (GUSTX - Free Report) and Vanguard Short Term Federal Fund (VSGBX - Free Report) . Each has earned a Zacks Mutual Fund #1 Rank (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

PGIM Short Duration High Yield Income Fund invests most of its net assets in a diversified portfolio of below investment grade high yield fixed income instruments with varying maturities. HYSAX also invests in derivatives and other instruments with similar economic characteristics.

PGIM Short Duration High Yield Income Fund has three-year annualized returns of 1.2%. As of the end of February 2022, HYSAX has invested 59.52% of its net assets in Miscellaneous Bonds.

GMO U.S. Treasury Fund invests most of its net assets in U.S. Treasury bills, bonds, notes, and other securities issued by the U.S. Treasury, along with Separately Traded Registered Interest and Principal Securities and other zero-coupon securities with an interest rate duration of one year or less. GUSTX also invests in the above-mentioned collateralized repurchase agreements.

GMO U.S. Treasury Fund has three-year annualized returns of 0.5%. GUSTX has an expense ratio of 0.02% compared with the category average of 0.64%.

Vanguard Short Term Federal Fund invests most of its net assets in short-term bonds issued or guaranteed by the U.S. government and its agencies. VSGBX also invests in non-guaranteed bonds with an average maturity of 1 to 4 years.

Vanguard Short Term Federal Fund has three-year annualized returns of 0.3%. Brian W. Quigley has been the fund manager of VSGBX since January 2015.

To view the Zacks Rank and the past performance of all short-term government bond mutual funds, investors can click here to see the complete list of short-term government bond mutual funds.

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