Diversified bond mutual funds provide excellent opportunities to investors looking for steady returns. At the same time, these lower the risk factor by holding securities from different sectors. Therefore, a downturn in any one sector only has a partial effect on the fund’s fortunes.
A relatively higher level of liquidity also makes diversified bond mutual funds more attractive. Moreover, investing in diversified bond mutual funds is preferred to individual bonds’ investing as building a portfolio of the second type may prove more expensive than the former.
Below we share with you three best-rated 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, their Zacks Rank and past performance.
PIMCO Investment Grade Corporate Bond A PBDAX seeks total return along with capital preservation. PBDAX invests a large portion of its assets in investment grade debt securities of varying maturities that may be represented by derivative instruments. The fund may invest a maximum 15% of its total assets in junk bonds, rated B or higher by Moody's. PIMCO Investment Grade Corporate Bond A has a three-year annualized return of 6.8%.
As of March 2016, PBDAX held 1260 issues with 22.72% of its assets invested in Cdx Ig25 5y Ice.
Baird Core Plus Bond Investor BCOSX is expected to provide a higher annual rate of total return than the Barclays (LON:BARC) U.S. Universal Bond Index. BCOSX invests a large chunk of its assets in debt securities including bonds that are denominated in the U.S. dollar, securities issued by the U.S. government or its affiliates, asset and mortgage backed securities, and corporate bonds issued by both domestic and foreign corporate bodies. Though BCOSX mainly focuses on acquiring investment-grade debt securities, it may also invest not more than 20% of its assets in securities that are rated below investment grade and known as “junk” bonds. Baird Core Plus Bond Investor has a three-year annualized return of 4.9%.
BCOSX has an expense ratio of 0.55% compared with the category average of 0.79%.
Voya Intermediate Bond R IIBOX invests a major portion of its assets in investment-grade bonds including corporate, government and mortgage bonds. IIBOX seeks to provide maximum total return. Voya Intermediate Bond R has a three-year annualized return of 4.9%.
As of June 2016, IIBOX held 1042 issues with 6.55% of its assets invested in US Treasury N/B 1.125 6/30/2021.
To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.
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Zacks Investment Research