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.
Investing in diversified bond funds is preferred 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.
Below, we share with you three top-ranked diversified bond mutual funds, namely Federated Hermes International Bond Strategy FIBPX, Goldman Sachs Dynamic Bond GSOPX and iShares U.S. Intermediate Credit Bond Index Fund BICBX. Each has 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.
Federated Hermes International Bond Strategy invests mainly in emerging market fixed-income securities, including dollar and non-dollar debt from governments, agencies and corporations, across all ratings and maturities, including below investment grade. It is non-diversified. The fund has returned 5.9% over the past three years.
Ihab Salib has been one of the fund managers of FIBPX since 2009.
Goldman Sachs Dynamic Bond typically invests most of its net assets and borrowings in a diversified mix of U.S. and international investment-grade and high-yield bonds, along with other fixed-income securities. The fund has returned 7.5% over the past three years.
As of December 2025, GSOPX had 49% of its assets invested in Total Misc Bonds.
iShares U.S. Intermediate Credit Bond Index Fund invests nearly all its assets in index bonds, tracking a market-weighted benchmark of investment-grade, dollar-denominated, fixed-rate, taxable corporate and government-related bonds with intermediate maturities. The fund has returned 5.3% over the past three years.
BICBX has an expense ratio of 0.12%.
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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This article originally published on Zacks Investment Research (zacks.com).
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