Fixed-income securities are preferred by investors ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories can be considerable. This is why most investors select mutual funds since these are convenient and affordable. Also, diversified bond funds reduce the risk involved in holding securities from different sectors. Therefore, a downturn in any one sector has a partial effect on the fund’s fortunes.
Below we share with you three top-ranked diversified 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 diversified bond funds.
Putnam Diversified Income Y (PDVYX - Free Report) seeks maximization of income consistent with capital preservation. PDVYX invests primarily in securitized debt securities and other obligations that are rated investment-grade or lower. These debt instruments are issued by companies and governments based globally. Putnam Diversified Income Y has returned 5.8% over the last one-year period.
As of March 2018, PDVYX held 1844 issues, with 7.66% of its assets invested in Federal National Mortgage Association 3.5%.
T. Rowe Price Strategic Income (PRSNX - Free Report) invests a major portion of its assets in income generating bonds. It may invest a maximum of half of its assets in foreign debt instruments that are non-U.S. dollar-denominated. It may also invest not more than 65% of its assets in securities that are rated non investment-grade. The diversified bond mutual fund returned 1.5% in the last one year period.
PRSNX has an expense ratio of 0.71% compared to a category average of 0.91%.
BlackRock Floating Rate Income Investor A (BFRAX - Free Report) seeks a high level of income as well as appreciation of capital for the long run. BFRAX invests a large chunk of its assets in floating rate securities. The fund may also invest in second lien floating rate loans or senior floating rate loans. BlackRock Floating Rate Income Investor A has one-year annualized returns of 3.2%.
James Keenan is one of the fund managers of BFRAX since 2010.
To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of diversified bond funds.
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