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If you have been looking for Diversified Bonds funds, it would not be wise to start your search with Putnam Diversified Income A (PDINX - Free Report) . PDINX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify PDINX 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 PDINX. Since Putnam Diversified Income A made its debut in October of 1988, PDINX has garnered more than $463.23 million in assets. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 1.46%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.29%, which places it in the middle third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. The standard deviation of PDINX over the past three years is 4.51% compared to the category average of 9.29%. Over the past 5 years, the standard deviation of the fund is 4.58% compared to the category average of 11.1%. This makes the fund less 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.
If you believe interest rates will rise, this is an important factor to look at. PDINX has a modified duration of 3.6, which suggests that the fund will decline 3.6% for every hundred-basis-point increase in interest rates.
This fund has a beta of 0.66, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PDINX has a negative alpha of -0.2, 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, PDINX has 21.5% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 30.5%, giving PDINX an average quality of BBB. This means that it focuses on medium quality securities.
However, it is worth noting that 34% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, PDINX is a load fund. It has an expense ratio of 0.98% compared to the category average of 0.99%. So, PDINX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $500; each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively weak performance, better downside risk, and lower fees, Putnam Diversified Income A ( PDINX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak 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. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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Is PDINX a Strong Bond Fund Right Now?
If you have been looking for Diversified Bonds funds, it would not be wise to start your search with Putnam Diversified Income A (PDINX - Free Report) . PDINX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify PDINX 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 PDINX. Since Putnam Diversified Income A made its debut in October of 1988, PDINX has garnered more than $463.23 million in assets. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 1.46%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.29%, which places it in the middle third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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. The standard deviation of PDINX over the past three years is 4.51% compared to the category average of 9.29%. Over the past 5 years, the standard deviation of the fund is 4.58% compared to the category average of 11.1%. This makes the fund less 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.
If you believe interest rates will rise, this is an important factor to look at. PDINX has a modified duration of 3.6, which suggests that the fund will decline 3.6% for every hundred-basis-point increase in interest rates.
This fund has a beta of 0.66, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PDINX has a negative alpha of -0.2, 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, PDINX has 21.5% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 30.5%, giving PDINX an average quality of BBB. This means that it focuses on medium quality securities.However, it is worth noting that 34% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, PDINX is a load fund. It has an expense ratio of 0.98% compared to the category average of 0.99%. So, PDINX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $500; each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, even with its comparatively weak performance, better downside risk, and lower fees, Putnam Diversified Income A ( PDINX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak 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. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.