#1 Ranked Government Bond Mutual Funds by Zacks Investment Research
Conservative investors prefer debt instruments not only because they safeguard the capital invested but also for the regular income flows they provide. Bonds bring a great deal of stability to an equity-heavy portfolio while providing dividends more frequently than individual bonds. U.S government bonds funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered to be the safest in the bond fund category and are ideal options for the risk-averse investor.
Below we will share with you 5 top rated government bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all government bond funds, investors can click here to see the complete list of funds.
Fidelity Spartan Long-Term Treasury Bond Index Fund Fidelity Advantage (MUTF:FLBAX) seeks high current income. The fund invests a lion's share of its assets in securities listed in Barclays U.S. Long Treasury Bond Index. The fund tries to duplicate the performance of Barclays U.S. Long Treasury Bond Index by using statistical sampling techniques on the back of interest rate sensitivity and maturity among others. The government bond mutual fund returned 3.74% over the last one year period.
The fund has an expense ratio of 0.10% as compared to category average of 0.56%.
Dreyfus US Treasury Long-Term (MUTF:DRGBX) invests major portion of its assets in U.S. Treasury instruments. It may also invest in other instruments which are approved by the domestic government or issued by its entities. It generally has duration of more than equal to 7.5 years and minimum of 10 years of weighted duration of maturity. The government bond mutual fund returned 3.45% over the last one year period.
Robert Bayston is the fund manager and has managed this fund since 2008.
Vanguard Long-Term Treasury (MUTF:VUSTX) seeks a high level of current income which is sustainable. The fund invests a large share of its assets in U.S. Treasury securities such as bills and bonds. It aims to have an average weighted maturity period between 15 to 30 years. The government bond mutual fund returned 3.73% over the last one year period.
As of March 2014, this fund held 31 issues with 10.41% of its assets invested in US Treasury Bond 2.75%.
DWS Global Inflation A (MUTF:TIPAX) invests in inflation-indexed bonds and other fixed income instruments of both U.S. and foreign governments or which are issued by other organizations affiliated by them. It may invest a maximum of 30% of its assets in commodity related derivatives including swaps and futures contracts. It may also invest in REITs. The government bond mutual fund returned 3.87% over the last one year period.
The fund has an expense ratio of 0.87% as compared to category average of 0.79%.
PIMCO Real Return A (MUTF:PRTNX) seeks return with preservation of capital. It invests in inflation-indexed bonds which are issued by the domestic and foreign government or their agencies irrespective of their maturity duration. A maximum of 10% of its assets is invested in junk bonds which have a minimum rating of B. The government bond mutual fund returned 4.15% over the last one year period.
Mihir P. Worah is the fund manager and has managed this fund since 2007.