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These Bond Funds And Bond ETFs Are Now Among Your Best Choices

Tom Madell profile picture
Tom Madell


  • Investors may be asking themselves if bond fund or bond ETF returns are going to collapse in light of recent interest rate rises.
  • But since future bond market performance is extremely difficult to predict, investors, if they continue to hold such funds, should consider investing only in funds with the most favorable characteristics.
  • I have done a highly extensive search of bond funds and ETFs from 7 categories in order to identify these funds in addition to my previously "Recommended Funds".
  • For investors who want to consider which categories of funds may offer the best prospects right now, I briefly discuss which categories these may be.

With interest rates have risen over the last six months, especially since the beginning of this year, as you can see in this chart showing the 10-year U.S. Treasury yield, you may be asking yourself whether bond funds and bond ETFs, which generally had been doing so well until the start of the year, are beginning to collapse. Since bond returns are inversely related to yields, rising rates mean that while dividend payments may be going up, total returns may wind up going down. In fact, since the beginning of the year, many popular bond funds have gone down more than 2%.

Of course, bond funds don't typically do as well as stock funds over the long term and will vary considerably depending on a particular bond fund's category. But the most widely owned bond fund category, intermediate term funds, often called "core" funds, have generally averaged more than 6% annualized over the last two years. Not bad, especially as compared to money market funds which barely returned more than 1%.

But just as for stocks, future bond fund performance is very hard to predict. Therefore, rather than trying to guess which way interest rates will now be headed, it makes sense to merely try to invest in the best bond funds one can find based on a variety of important criteria. But searching out such bond funds can be tedious. So, in this article, I have done my best to simply the process for investors.

As investors, we have no control over whether rates will continue to go up or down from here, or to stabilize. But we do have control over which bond funds we select, and therefore, we should pay considerable attention to not only which funds have shown among the best performances within their category, but also to other favorable characteristics. These include

This article was written by

Tom Madell profile picture
Tom Madell, Ph.D., is the publisher of Mutual Fund/ETF Research Newsletter, a free newsletter which began publication in 1999 with thousands of readers. It has become one of the most popular mutual fund/ETF newsletters on the internet, as shown here. His site has been named as one of the "Top 12 Investment Newsletters Focusing on Mutual Funds" at mutualfunds.com , an important fund information provider, under "Fund Newsletter". Also, recently his Newsletter was recognized as one of 5 expert mutual fund resources worth following offering free, and, in its case, particularly "unbiased, useful, and original advice" at http://funds-newsletter.com/fundreference-art.htm .He is also a researcher/writer/investor whose articles have appeared on hundreds of websites, including the Wall Street Journal, USA Today, Morningstar and in the international media.His articles have been among the most popular among those posted on the Morningstar.com website by non-Morningstar employed contributors.His recommendations have an outstanding, long-standing record of success . His complete list of former articles can be accessed at http://funds-newsletter.com

Analyst’s Disclosure: I am/we are long VBTLX, VCAIX, PTTRX, VWEHX, VFSTX, PFRAX, VTABX, VIPSX, VTAPX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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