Intermediate-term investment grade 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.
Meanwhile, fixed income securities having average maturity between three and 10 years are classified as intermediate securities. These funds are believed to 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.
Below we will share with you three top-ranked 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. To view the Zacks Rank and past performance of all government intermediate-term investment grade bond funds, investors can click here to see the complete list of funds.
Thornburg Limited Term Income R5 (THRRX - Free Report) invests more than 65% of its assets in debt obligations issued by U.S. government and its instrumentalities and agencies. The fund also invests in rated debt obligations. THRRX maintains a portfolio that has dollar-weighted average maturity of five years or lower. Thornburg Limited Term Income R5 has returned 0.3% in the past year.
THRRXhas an expense ratio of 0.67% as compared to the category average of 0.76%.
Putnam Income Y (PNCYX - Free Report) invests heavily in bonds like securitized debt instruments, including mortgage-backed securities. The fund may also invest in bonds issued by governments all over the world denominated in U.S. dollar. PNCYX focuses on investment-grade or below-investment-grade bonds that have maturities of three years or higher. Putnam Income Y has returned 2.5% in the past year.
Michael V. Salm is one of the fund managers of PNCYX since 2007.
Principal Income R6 (PICNX - Free Report) invests mainly in a diversified group of fixed-income securities like U.S. government securities, mortgage-backed securities and corporate bonds. PICNX may invest around 35% of its assets bonds rated BB+ or lower by S&P Global, and Ba1 or lower by Moody's. The fund’s average portfolio maturity is between 75% and 125% of the maturity of the Bloomberg Barclays U.S. Aggregate Bond Index. Principal Income R6 has returned 0.7% in a year’s time.
As of July 2018, PICNX held 330 issues with 0.97% of its assets invested in Surgery Center Holdings, Inc. 8.88%.
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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