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Best Bond Funds

Info_lover | May 9, 2010 |

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The best bond funds are mostly intermediate-term funds that hold debt securities (bonds) maturing in 5 to 10 years on average. Every bond fund will state in its prospectus the average maturity for the debt securities held. Intermediate-term funds have been good investments for years with a nice blend of return vs. risk. They are popular and you might want to own one.

As a suggestion, I would recommend you to avoid long-term funds and keep some money in the intermediate-term varieties. Also if possible, park some money in short-term bond funds as they have average maturities of less than 5 years. If inflation and interest rates head north, you have much less risk here. INFLATION-PROTECTED bond funds that hold debt securities issued by the government that are adjusted (principal and interest) for changes in inflation could be one of the best high yield bond funds as well.

You need to find a quality value fund that pays higher than average dividends. In case the market declines, at least you will earn higher dividends. Also consider specialty (non diversified) sectors like NATURAL RESOURCES, ENERGY, BASIC MATERIALS, PRECIOUS METALS (gold & silver) and REAL ESTATE funds. As a group, these can be good investments when inflation and/or interest rates rear their ugly heads.

Regardless of the specific investment decisions you make, the best bond mutual funds and best stock funds do have one thing in common: lower than average costs and expenses. High overhead directly eats away at your investment returns. Below is a list of the best performing bond funds:

Delaware Diversified Income A (DPDFX) - This diversified bond fund mainly invests in three sectors of the fixed-income securities markets, the U.S. Investment Grade Sector, the U.S. High-Yield Sector, and the International Sector. This diversified bond fund invests a majority of its assets, at least 80%, of its net assets in fixed income securities. As of July 2009, it has a portfolio turnover of 422% against a category average of 226%. This is quite possibly the best bond fund around on the market.
Pioneer Strategic Income A (PSRAX) - The diversified bond fund invests at least 80% of its assets in a broad range of both issuers and segments of the debt securities markets. The diversified bond fund invests in three segments of the debt markets - below investment grade (high yield) securities of U.S. and non-U.S. issuers, investment grade securities of U.S. issuers and investment grade securities of non-U.S. issuers. As of September 2009, it has a portfolio turnover of 32% against a category average of 104%. This is one of the best municipal bond funds available.
Virtus Multi-Sector Fixed Income A (NAMFX) - This diversified bond fund invests in all sectors of the bond market, concentrating on undervalued sectors and securing gains from overvalued sectors. At least 80% of the fund's assets are invested in fixed income securities issued or guaranteed by the U.S. Government or its agencies, in debt securities issued by foreign issuers and in junk bonds. As of July 2009, it has a portfolio turnover of 91% against a category average of 104%. This is one of the best corporate bond funds around.

The above bond funds got to the top by offering value and great ROI (return of investment) to customers like you and me.