Diversified bond mutual funds provide excellent opportunities to investors looking for steady returns with a relatively low level of risk. These funds provide exposure to a wide range of market sectors, thus reducing sector-specific risks. A relatively higher level of liquidity also makes diversified bond funds more attractive. Meanwhile, investing in diversified bond 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 4 top-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.
Old Westbury Fixed Income (MUTF:OWFIX) seeks total return through current income and growth of capital. OWFIX maintains a diversified portfolio by investing a large chunk of its assets in fixed income securities that are rated investment-grade including corporate and U.S. government securities. OWFIX may also invest in other securities including ETFs, municipal and inflation-protected securities. The Old Westbury Fixed Income fund has a year-to-date return of 0.7%.
As of October 2015, OWFIX held 103 issues with 17.85% of its assets invested in US Treasury Note 1.875%.
Schwab Intermediate-Term Bond (MUTF:SWIIX) invests most of its assets in debt securities that are affiliated by the U.S. government and its agencies, and that are issued by domestic companies. SWIIX primarily focuses on acquiring securities that are rated investment grade or above. SWIIX is expected to maintain a dollar-weighted average maturity of 3-10 years. The Schwab Intermediate-Term Bond fund has a year-to-date return of 0.8%.
SWIIX has an expense ratio of 0.45% as compared to the category average of 0.82%.
PIMCO Fixed Income SHares: Series M (MUTF:FXIMX) seeks to maximize total return with capital preservation. FXIMX may invest 100% of its assets in mortgage - and other asset-backed securities that are believed to provide a fixed level of income. These securities include commercial mortgage-backed securities, collateralized mortgage obligations and mortgage pass-through securities. The PIMCO Fixed Income SHares M fund has a year-to-date return of 0.4%.
Curtis A. Mewbourne is the fund manager of FXIMX since 2009.
Cavanal Hill Intermediate Bond Fund Investor (MUTF:APFBX) generally invests in debt securities including notes and debentures, and bills that are issued by domestic companies and the U.S. government. APFBX may also invest in fixed income securities including municipal securities, mortgage-related securities and asset-backed securities. APFBX primarily focuses on acquiring securities that are rated among the three highest ratings categories. APFBX invests the major portion of its assets in bonds and is expected to have the dollar-weighted average maturity between three and ten years. The Cavanal Hill Intermediate Bond Investor fund has a year-to-date return of 0.8%.
APFBX has an expense ratio of 0.78% as compared to the category average of 0.82%.