2017 RANKING & REVIEWS
TOP RANKING INCOME FUNDS
2017 Guide: Securing Your Financial Future with the Best Fixed Income Funds
Are you looking for a way to protect your investments? With an election throwing the country into a whirlwind, it is unsure how the markets will react once President Elect Trump takes office. If you are close to retirement, or just a more conservative investor, you might be interested in fixed income funds.
Fixed income investments come in many types, but high income funds are a good way to hedge against a potentially volatile stock market. Investing for income is a smart move when the financial markets are unpredictable, because they lock in fixed rates for a specified time frame. From income bonds to certificates of deposits, the top income funds are a great way to protect your assets.
Award Emblem: Best Income Funds
While fixed income mutual funds are generally considered “safer” investments, finding the top income funds is not always easy. There are many options available, and it can be difficult to find the best income funds for you.
When going through the process of selecting investment trusts for income and other high income funds, chances are that you have many questions, including:
- What is the fixed income fund definition?
- What types of investment trusts for income are there?
- Are income bonds more risk-adverse?
- Why should I be investing for income?
- Where do I find the best fixed income mutual funds?
- Do income mutual funds protect me from a volatile stock market?
Throughout this 2017 guide, we will answer your questions. We will explain what income bonds are, as well as why investing for income can be a good financial strategy. Finally, we will provide a detailed review of the six best income funds.
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Advisory HQ’s List of Top 6 Top Income Funds
List is sorted alphabetically (click any of the fixed income funds below to go directly to the detailed review section for that income fund):
- Fidelity® Long-Term Treasury Bd Idx Fd
- MFS® Municipal High Income Fund
- SIT Tax Free Income Fund
- T. Rowe Price Tax Free High Yield Fund
- Vanguard Extended Duration Treasury Index Fund
- Vanguard Long-Term Treasury Fund
Top 6 Best Income Funds | Brief Comparison & Ranking
Fixed Income Funds | Type of Fixed Income Investment | Rate of Return | Risk |
| Fidelity® Long-Term Treasury Bd Idx Fd | Treasury Bond Fund | 1.21% | Above Average |
| MFS® Municipal High Income Fund | Municipal Bond Fund | 8.80% | Above Average |
| SIT Tax Free Income Fund | Municipal Bond Fund | 7.17% | Average |
| T. Rowe Price Tax Free High Yield Fund | Municipal Bond Fund | 8.22% | Above Average |
| Vanguard Extended Duration Treasury Index Fund | Treasury Bond Fund | 19.65% | Above Average |
| Vanguard Long-Term Treasury Fund | Treasury Bond Fund | 13.22% | Above Average |
Table: Top 6 Investment Trusts for Income / Above list is sorted alphabetically
Detailed Overview: Fixed Income Fund Definition
With so many investment types out there, it is certainly tough to keep them all straight. You may be looking for a fixed income fund definition, and we are here to help!
Fixed income is a particular type of investing where you receive return rates or periodic income at regular intervals, at generally predictable amounts. You will invest an initial amount, and then receive regular payments on that money.
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The top income funds essentially offer or guarantee a fixed income. These types of income funds attract risk-adverse investors or those who are nearing or in retirement. Those who are investing for income through these funds are able to avoid the volatility of the stock market.
Now that you know what fixed income investments are, the trick is choosing which one is best for you. With many types, what are the best fixed income funds for you?
Detailed Overview: Types of Fixed Income Funds
When venturing into the financial world of investing for income, there are many options to consider. There are several types of fixed income funds, including:
- Annuities: With an annuity, you deposit an initial amount and then get a check every month after a specified period.
- Municipal Bonds: These income funds are backed by the local or state government to fund local projects. You will deposit a higher amount and have a specified yield returned after the set period of time.
- Certificates of Deposits (CDs): These FDIC-insured investments offer a fixed rate of return over a set period. They are great for a time-specific savings plan and are low risk.
- Money Market Accounts: These FDIC-insured investments are similar to savings accounts, where you get a higher interest rate, but you are only able to make a certain number of withdrawals a month.
- Treasury Bonds: These type of fixed income funds require a $1,000 minimum investment and are a fixed-interest U.S. government debt security. The maturity will occur in 10 years and interest payments are made semi-annually.
As you can see, there are many different types of top income funds in the financial world. The trick is to choose the one that meets your needs and financial situation best. While this article focuses on fixed income funds, there are many different types out there.
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Detailed Review – Top Ranking Best Fixed Income Funds
Below, please find the detailed review of each of the high income funds on our list of fixed income mutual funds. We have highlighted some of the factors that allowed these income mutual funds to score so highly in our selection ranking.
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Fidelity® Long-Term Treasury Bd Idx Fd Review
The Fidelity® Long-Term Treasury Bd Idx Fd is an investment that seeks higher current incomes. This is considered one of the top income funds, ranking high in return when compared to other long-term government funds.
The fund invests about 80% of its assets that are found in the Barclays U.S. Long-Term Treasury Bond Index. Over the past year, this fund has returned 1.21%. When looking at three years, the number narrows to 6.98% return, and drops to 3.09% and 6.34% for five years and 10 years respectively.
We love that the fees are lower with this fixed income fund. Generally, you will see an expense ratio of 0.2%.
It is important to note that even though this is one of the best income funds, the risk is slightly above average when compared to other funds within its category.
Bottom Line
Overall, the Fidelity® Long-Term Treasury Bond Index Fund can be a good choice if you are looking to invest in long-term treasury bond funds. With low fees and a high return, it is easy to see why it makes the list of top income funds.
MFS® Municipal High Income Fund Review
The MFS® Municipal High Income Fund is one of the best income funds for municipal bonds out there. This fund has a high emphasis on high income that is exempt from federal income tax, while also considering some capital appreciation. It invests over 80% of its assets in securities and investments that are exempt from federal taxes.
In the past year, this impressive fund returned 8.80%. Over three years, the fund returned 8.76%, and in ten years it returned 5.19% on its investments. These are impressive returns, which is why the MFS® Municipal High Income Fund makes the list of best fixed income funds.
Fees are also below average, with a net expense ratio of 0.65%. However, you will want to note that the risk is slightly above average when compared to other high income funds.
Bottom Line
With a high return over the last 10 years, the MFS® Municipal High Income Fund makes our list of top income funds heading into 2017. You will see low fees and only slightly above average risk.
SIT Tax Free Income Fund Review
The SIT Tax Free Income Fund also seeks high current income that is exempt from any federal income taxes. The portfolio manager has headed this fund for over 18 years when it began, which means he knows the fund and market well.
It makes our list of best income funds for several reasons, but the main reason is the impressive return. For the past year, the SIT Tax Free Income Fund returned an impressive 7.17%, the number jumping to 7.93% if you look at the three-year snapshot. Over ten years it has returned 4.49%, with a 5.40% return since inception.
One drawback is that operating fees are slightly higher than other top income funds on our list. You will see 0.89% annual operation expenses with the SIT Tax Free Income Fund.
Bottom Line
If you are looking for a track record of success, with a fund manager that knows his portfolio, then the SIT Tax Free Income Fund might be one of the best fixed income funds for you.
T. Rowe Price Tax Free High Yield Fund Review
The T. Rowe Price Tax Free High Yield Fund is one option for the best income funds if you are looking to diversify your portfolio with high yield bonds.
With a past year annual return of 8.22%, this municipal bond fund is one of the best fixed income funds on the market.
That return also remains relatively constant over the years, which we love. For 3 years, they saw a 8.41% return, plus 7.01% for 5 years and 6.89% return since inception. Steady returns over a longer time show that a fund is relatively stable and able to handle wild fluctuations in the market.
There is an above average risk factor with the T. Rowe Price Tax Free High Yield Fund, but the returns may be worth it depending on your financial situation. Thankfully, the expenses are manageable, with only a 0.69% expense ratio.
Bottom Line
The T. Rowe Price Tax Free High Yield Fund offers a high, relatively consistent return, with only slightly increased risk. Overall, this is one of the best income funds.
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Vanguard Extended Duration Treasury Index Fund Review
The Vanguard Extended Duration Treasury Index Fund is one of the top income funds that follows the Barclays U.S. Treasury STRIPS 20-30 Year Equal Par Bond Index. It diversifies exposure to the long-term STRIPS market, while providing high current income with high credit quality.
Over the past year, the Vanguard Extended Duration Treasury Index Fund returned a whopping 19.65%. The number drops to a still impressive 17.29% over three years and 7.24% over five years. These returns clearly put it on our list of best fixed income funds.
This income fund does have higher than average risk when compared to other best income funds, but the expense ratio falls at just 0.44%.
Bottom Line
With $1.1 billion of net assets, the Vanguard Extended Duration Treasury Index Fund could be a good option for your portfolio. The high returns put it on our list of best fixed income funds, and if you can deal with some risk, you might be thankful you chose this one.
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Vanguard Long-Term Treasury Fund Review
The Vanguard Long-Term Treasury Fund is one of the best fixed income funds. It invests in debt that is issued from the federal government in the form of long-term treasury notes, bills, and bonds.
This past year, the top income funds saw a return of 13.22%, with an 11.04% return over three years. The five-year snapshot shows a return of 5.33% for the Vanguard Long-Term Treasury Fund, with a return of 7.84% over the past 10 years.
The average duration is 15 to 30 years, though, so if you are looking for short-term options, this might not be a good bet. The drawback is that a lengthy duration makes this fund more susceptible to interest rates than shorter-term funds.
Bottom Line
If you are interested in investing for income for the long term, the Vanguard Long-Term Treasury Fund might be good choice for your portfolio. You will need 15 to 30 years for it to come to maturity, but if you can risk the interest rates, you might see large returns.
Conclusion – Top 6 Best Fixed Income Funds
Fixed income funds are a good way to diversify your portfolio and protect yourself from a volatile investment market. Those who get into investing for income find that it can be a good source of steady income, which is great when heading into retirement.
The difficult part is knowing what the best fixed income funds are. It is also important to note that the best income funds for one person might not be the right option for you. You need to consider your options carefully and analyze how the income bonds or CDs fit into your short-term and long-term financial outlook.
Best Fixed Income Funds
When looking for the top income funds, these are some different types to consider:
- Annuities
- Municipal bonds
- CDs
- Money market accounts
- Treasury bonds
Be sure that you choose the best income funds for your situation. If you need a short-term investing option, the 10-year minimum of treasury bonds might not be a good idea. If you are shorter on upfront deposit funds, then municipal bonds might not be right for you.
It is important to weigh your options, choosing the best fixed income funds that meet your preferences and financial situation.
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