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 share with you 5 best-ranked diversified bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the funds to outperform their peers in the future.
PIMCO Fixed Income SHares: Series C (MUTF:FXICX) seeks to maximize total return with preservation of capital. FXICX invests the majority of its assets in fixed-income securities including corporate debt obligations, inflation-indexed securities of corporate bodies and structured notes. FXICX allocates its assets throughout the globe. The PIMCO Fixed Income SHares C fund has a three-year annualized return of 1.6%.
Curtis Mewbourne is the fund manager of FXICX since 2009.
PIMCO Income Fund A (MUTF:PONAX) invests a minimum of 65% of its assets in fixed income securities from a wide range of sectors. These securities may include options, futures contracts and swap agreements. PONAX may invest not more than half of its assets in securities that are rated below investment grade. The PIMCO Income A fund has a three-year annualized return of 3.9%.
PONAX has an expense ratio of 0.85% compared to a category average of 1.02%.
Toreador Core Fund Adv (MUTF:TORLX) seeks long-term capital growth. TORLX invests mostly in domestic and foreign large-cap companies. The market capitalizations of these companies are identical to those listed in the S&P 500 Index or the Russell 1000 Index. The Toreador Core Retail fund has a three-year annualized return of 8%.
As of October 2015, TORLX held 97 issues, with 5.14% of its total assets invested in Micron Technology Inc. (NASDAQ:MU).
Columbia Strategic Income Fund A (MUTF:COSIX) invests in U.S. government bonds, investment grade corporate bonds, mortgage backed securities, inflation-protected securities, convertible securities as well as high yield instruments. COSIX seeks total return that includes current income and capital appreciation. The Columbia Strategic Income A fund has a three-year annualized return of 0.7%.
Colin Lundgren is the lead manager and has managed COSIX since 2010.
John Hancock Income Fund A (MUTF:JHFIX) seeks a high level of current income. JHFIX mostly invests in three types of securities. These include corporate debt securities from both developed and emerging markets, U.S. government securities and domestic high yield bonds. JHFIX may invest a maximum 10% of its assets in foreign stocks. The JHancock Income A fund has a three-year annualized return of 1.7%.
JHFIX has an expense ratio of 0.81% compared to a category average of 1.02%.