Investing in diversified bond funds is preferred more to individual bond investing, as building a portfolio of the second type may prove relatively more expensive. A higher level of liquidity also makes diversified bond funds more attractive.
Moreover, mutual funds having significant exposure to diversified bonds are excellent choices for investors seeking steady returns with a relatively low level of risk. Investing in funds that maintain a portfolio of bonds issued across a wide range of market sectors also reduces sector-specific risk.
Below, we share with you three top-ranked diversified bond mutual funds, namely Ave Maria Bond Fund AVEFX, Pacific Funds Strategic Income PLSFX and PIMCO Fixed Income Shares FXIEX. 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 funds.
Ave Maria Bond Fund seeks the preservation of principal with a reasonable level of current income. AVEFX invests mainly in investment-grade debt securities of primarily domestic issuers. It may also invest a portion of its net assets in preferred stocks, convertible securities and common stocks paying dividends and in securities that appear comparatively undervalued. The fund has returned 3.6% over the past three years.
George P. Schwartz has been one of the fund managers of AVEFX since 2019.
Pacific Funds Strategic Income primarily invests in debt instruments that generate income. PLSFX’s allocations to non-investment grade debt instruments and investment grade debt instruments vary on the advisor’s view of market conditions. The fund has returned 4.5% over the past three years.
As of December 2022, PLSFX had 66.5% of its assets invested in Total Misc Bonds.
PIMCO Fixed Income Shares usually does not purchase bonds subject to the federal alternative minimum tax. FXIEX invests the majority of its net assets in a portfolio of U.S. fixed-income instruments comprising debt securities whose interest is, at the time of issuance, exempt from federal income tax. The fund has returned 1.8% over the past three years.
FXIEX has an expense ratio of 0.07% compared with the category average of 0.92%.
To view the Zacks Rank and the past performance of all diversified bond mutual funds, investors can click here to see the complete list of diversified bond mutual funds.
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