Fixed-income securities are preferred by investors ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories can be considerable. This is why most investors select mutual funds since they are convenient and affordable. Also, diversified bond funds reduce the risk involved in holding securities from different sectors. Therefore, a downturn in any one sector has a partial effect on the fund's fortunes.
Below we share with you four best-ranked 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.
Putnam Diversified Income Trust A (MUTF:PDINX)seeks high income. PDINX primarily invests in bonds that are securitized debt instruments including mortgage-backed investments and in other obligations of companies as well as governments globally. Putnam Diversified Income Trust A has returned 10.6% over the last one-year period.
PDINX has an expense ratio of 1.00% compared with the category average of 1.20%.
PIMCO Income Fund D (MUTF:PONDX)invests the lion's share of its assets in a multi-sector portfolio of fixed income instruments such as forwards or derivatives such as options, futures contracts or swap agreements. PONDX may also invest almost half of its assets in high yield securities which are rated below investment grade but at least Caa by Moody's, or equivalently rated by S&P or Fitch. The fund seeks maximization of income along with growth of capital. PIMCO Income Fund D has returned 9.6% over the last one-year period.
Alfred Murata is one of the fund managers of PONDX since 2013.
Putnam Absolute Return 100 Fund (MUTF:PARYX)seeks growth of return by maintaining a well-diversified portfolio. This portfolio reflects several uncorrelated fixed-income strategies, which are designed to utilize market inefficiencies across multiple fixed-income sectors and global markets. Putnam Absolute Return 100 Fund has returned 4.2% over the last one-year period.
As of March 2017, PARYX held 444 issues, with 13.98% of its assets invested in Putnam Short Term Investment P.
Hartford Strategic Income Fund A (MUTF:HSNAX)invests a bulk of its assets in U.S. as well as non-U.S. debt securities. HSNAX normally invests in debt securities that are non-investment grade, highly rated securities and non-U.S. securities, including those from emerging markets. The fund seeks a high level of income. Hartford Strategic Income Fund A has returned 9.6% over the last one-year period.
HSNAX has an expense ratio of 0.96% compared with the category average of 1.03%.