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Mutual Fund Commentary

Fixed income securities having an average maturity period between three and 10 years are classified as intermediate debt securities. These funds assure more stability and provide higher returns than what is offered in the short term. Thus, intermediate-term funds are safer than small-term funds. Moreover, investment grade intermediate bond mutual funds provide excellent opportunities for investors interested in safer moderate returns.

Investment grade bonds are generally considered safer than those rated below investment grade, which are commonly known as "junk" bonds. Bonds that are rated 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) by bond rating firms, like Standard & Poor's, are usually known as investment grade bonds. Also, bond funds are considered good investment propositions in a low-rate environment.

Below we share with you four top-rated intermediate-term investment grade bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

USAA Intermediate-Term Bond (USIBX - Free Report) invests the bulk of its assets in a wide variety of debt securities with maturity between three to 10 years. USIBX invests mainly in dollar-denominated investment grade bonds, but may invest around one-tenth of its assets in high yield debt securities. The fund seeks a high level of income without unnecessary risks to principal. USAA Intermediate-Term Bond returned 5.5% in the last one-year time frame.

USIBX has an expense ratio of 0.62% as compared to the category average of 0.79%.

Columbia Corporate Income Z (SRINX - Free Report) seeks appreciation of capital and income. SRINX invests the majority of its assets in corporate and non-government issued debt securities. The fund also invests more than 60% of its assets in investment grade securities. SRINX normally have an average effective period of three to 10 years. Columbia Corporate Income Z has one-year return of 6.9%.

Brian Lavin is one of the portfolio managers of SRINX since 2010.

BMO TCH Core Plus Bond Y (MCYBX - Free Report) normally invests in debt securities with low investment grades. MCYBX seeks return through growth of income. The fund invests the lion’s share of its assets in mortgage-backed, asset-backed, government and corporate debt securities. BMO TCH Core Plus Bond Y returned 5.8% in the last one-year time frame.

MCYBX has an expense ratio of 0.59% as compared to the category average of 0.79%.

Fidelity Advisor Investment Grade Bond A (FGBAX - Free Report) seeks high current income. The fund invests the majority of its assets in debt securities rated investment grade and related repurchase agreements. FGBAX distributes its assets among funds from various sectors and with different maturity periods. 

As of September 2016, FGBAX held 914 issues with 4.98% of its assets invested in Fidelity Cent Investment Portfolios.

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

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