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Is RPSIX a Strong Bond Fund Right Now?

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If you have been looking for Diversified Bonds funds, a place to start could be T. Rowe Price Spectrum Income (RPSIX - Free Report) . RPSIX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify RPSIX 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

T. Rowe Price is responsible for RPSIX, and the company is based out of Baltimore, MD. T. Rowe Price Spectrum Income debuted in June of 1990. Since then, RPSIX has accumulated assets of about $6.90 billion, according to the most recently available information. Charles Shriver is the fund's current manager and has held that role since May of 2011.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 2.07%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 1.07%, which places it in the top third during this time-frame.

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. RPSIX's standard deviation over the past three years is 5.79% compared to the category average of 2.95%. Over the past 5 years, the standard deviation of the fund is 5.22% compared to the category average of 3.25%. This makes the fund more volatile than its peers over the past half-decade.

RPSIX carries a beta of 0.72, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.23, 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, RPSIX has 33.75% in high quality bonds rated at least 'AA' or higher, while 30.7% are of medium quality, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 31.39%, giving RPSIX an average quality of A. This means that it focuses on high quality securities.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, RPSIX is a no load fund. It has an expense ratio of 0.63% compared to the category average of 0.89%. From a cost perspective, RPSIX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $100.

Bottom Line

Overall, T. Rowe Price Spectrum Income ( RPSIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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