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5 Best-Ranked Diversified Bond Funds Set to Beat Peers

Zacks Equity Research

Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund’s fortunes.

Below we will share with you 5 top rated diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all real estate funds, investors can click here to see the complete list of funds.

Wells Fargo Advantage Diversified Income Builder A (EKSAX) diversifies its portfolio by investing a large portion of its assets in both domestic and foreign securities. It primarily invests in corporate debt securities having junk ratings. It allocates 70-90% of its assets in debt securities and invests a maximum of 30% of its assets in equity securities. The diversified bond mutual fund returned 9.4% in the last one year period.

Margaret Patel is the fund manager and she has managed this diversified bond mutual fund since 2007.

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Prudential Total Return Bond A (PDBAX) seeks total return. The fund invests a major portion of its assets in fixed-income securities, other than preferred stock, having a maturity of more than one year from the time of issue. It may invest a maximum of 30% of its assets in junk bonds, not rated below CCC, and up to 30% of its assets in foreign debt securities. The diversified bond mutual fund returned 6.4% in the last one year period.

As of October 2014, this diversified bond mutual fund held 1503 issues, with 12.72% of its total assets invested in 5 Year US Treasury Note Future Dec14.

T. Rowe Price Strategic Income (PRSNX) invests a major portion of its assets in income generating securities. It may invest a maximum of half of its assets in foreign debt instruments. It may also invest a maximum of 65% of its assets in securities that are rated below investment grade. The diversified bond mutual fund returned 5.9% in the last one year period.

The diversified bond mutual fund has an expense ratio of 0.66% compared to a category average of 1.05%.

Spirit of America Income A (SOAIX) invests major portion of its assets in taxable municipal bonds, income generating convertible securities, high yield domestic corporate bonds, preferred stocks and CMO’s. The fund may invest in U.S. government agency securities issued or guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. The diversified bond mutual fund returned 13.4% in the last one year period.

As of October 2014, this diversified bond mutual fund held 279 issues, with 2.27% of its total assets invested in Tobacco Settlement Fing Corp V As 6.706%.

T. Rowe Price Spectrum Income Fund (RPSIX) generally invests in domestic and foreign bond funds, money market funds, and an income-oriented stock fund. The fund may invest in funds holding high-quality U.S. and non-U.S. bonds. It broadly diversifies its assets among T. Rowe Price mutual funds from specific market sections. The diversified bond mutual fund returned 5.1% in the last one year period.

Charles M. Shriver is the fund manager and has managed this diversified bond mutual fund since 2011.

About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Learn more about the Zacks Mutual Fund in our Mutual Fund Center.


Read the analyst report on EKSAXPDBAXPRSNXSOAIXRPSIX


View All Zacks #1 Ranked Mutual Funds

Zacks Investment Research