Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Also, diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund's fortunes.
Below we will share with you 5 potential diversified bond mutual funds. Each has earned either a Zacks #1 Rank (Strong Buy) or a Zacks Rank #2 (Buy) as we expect these mutual funds to outperform their peers in the future.
Voya Intermediate Bond A (MUTF:IIBAX) seeks to provide maximum total return. IIBAX invests a major portion of its assets in investment-grade bonds including corporate, government and mortgage bonds. IIBAX is expected to have a dollar-weighted average duration of 3-10 years. The Voya Intermediate Bond A fund returned 3.1% in the last one year period.
IIBAX has an expense ratio of 0.70% compared to a category average of 0.85%.
Fidelity Total Bond (MUTF:FTBFX) invests a lion's share of its assets in debt instruments and repurchase agreements. FTBFX follows the Barclays U.S. Universal Bond Index in order to invest in the investment-grade, high yield, and emerging market securities. FTBFX may invest a maximum of one-fifth of its assets in debt securities that are rated below investment-grade. The Fidelity Total Bond fund returned 2.9% in the last one year period.
As of March 2015, FTBFX held 1,489 issues, with 4.85% of its total assets invested in US Treasury Note 1.25%.
MFS Total Return Bond A (MUTF:MRBFX) seeks total return through current income. MRBFX invests a large chunk of its assets in debt securities, which include corporate bonds, U.S. government securities, asset-backed securities and foreign government securities. MRBFX primarily focuses on acquiring investment grade securities but may also allocate a smaller portion of its assets in lower quality debt instruments. The MFS Total Return Bond A fund returned 2.5% in the last one year period.
Robert D. Persons is one of the fund managers and has managed MRBFX since 2006.
Lord Abbett Total Return A (MUTF:LTRAX) generally invest in debt securities that are rated as investment-grade including securities approved by the U.S. government or its affiliates, corporate debt derivatives and mortgage-backed securities. LTRAX may invest not more than 20% of its assets in debt securities that are believed to provide high-yield and a maximum of one-fifth of its assets may get invested in securities that are denominated in foreign currencies. The Lord Abbett Total Return A fund returned 2.6% in the last one year period.
LTRAX has an expense ratio of 0.82% compared to a category average of 0.85%.
RidgeWorth Total Return Bond A (MUTF:CBPSX) seeks to provide total return higher than that of the broad U.S. investment grade bond market. CBPSX invests a majority of its assets in fixed-income derivatives including debt securities issued by the government and its affiliates, corporate bonds and asset-backed securities. CBPSX invests in debt securities throughout the globe including those from emerging economies. CBPSX may invest a maximum of 20% of its assets in high-yield securities that rated below investment-grade. The RidgeWorth Total Return Bond A fund returned 2.2% in the last one year period.
As of April 2015, FTBFX held 285 issues, with 9.39% of its total assets invested in US Treasury Note 0.875%.