Overview of the 10 Best Bond Funds
Mutual funds have long been an easy way for both novice and sophisticated investors to invest in a wide range of companies across the globe.
Specifically, bond funds gained popularity during the 2008 financial crisis, when tremendous market volatility caused investors to flee the stock markets and into bonds.
From a relative perspective, the best bond funds potentially provide more stability within a portfolio.
With so many average, great, and best bond funds available for investors, it can be a challenge to make the most suitable choice based on the risk tolerance, price point, and time frame for an investment.
In order to remove some of the mystery that can come with selecting one of the best bond funds available to you today, we have compiled a list of the top ten investments based on expenses, performance, and management.
This article presents 10 of the top bond funds in which to invest.
What Are Bond Funds?
Bond funds work similarly to equity or stock mutual funds, providing investors with a way to purchase shares of a number of bonds or other debt securities through a single investment.
Just like equity mutual funds, bond funds range greatly in investment objectives, which directly correlate with how much fluctuation the fund may experience.
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Investors should know that it is possible for a bond fund’s return to be negative.
These investments also have a tendency to pay consistent dividends as well as long-term capital appreciation.
List of the Top 10 Bond Funds
Sorted Alphabetically:
- BlackRock Secured Credit (BMSAX)
- Fidelity Capital and Income Fund (FAGIX)
- Fidelity Strategic Income (FSICX)
- Loomis Sayles Bond (LSBRX)
- Lord Abbett High Yield Fund (LHYAX)
- Osterweis Strategic Income (OSTIX)
- PIMCO Income Fund (PONAX)
- PIMCO Unconstrained Bond (PUBDX)
- T. Rowe Price Strategic Income (PRSNX)
- Wells Fargo Advisors CoreBuilder (WFCMX)
What Do Bond Fund Investors Generally Consider?
There are numerous factors that investors take into consideration when seeking the top best bond funds to invest in.
These factors include:
| Factors to Consider | Explanation |
| Expenses | Although a lot of bond investors focus on the initial fees, it is the expense ratio that has the biggest impact on overall return. The expense ratio is the annual fee charged by any fund, which includes management costs, administrative charges, and distribution fees, as well as operating expenses. Bond funds with high expense ratios can dramatically decrease the total return of the investment, even if returns look promising. |
| Duration | Another important factor in selecting a bond fund revolves around the duration of the underlying securities. Given the current interest rate market, and the potential for interest rates to rise in the near future, selecting a best bond fund with a short to mid-term duration could be an advantage. Bond funds with a longer duration may not perform as well as short or mid-term funds as the underlying securities may be harder to unload when interest rates rise. |
| Consistency in Yields | Most investors utilize top bond funds as a way to stabilize an equity portfolio, not necessarily to achieve outstanding returns. However, it can be difficult not to be drawn in by higher performing bond funds. As a consideration for selection, consistency in yields speaks volumes about the experience of managers handling the investments. It is important to note that past performance does not guarantee future performance; however, historical returns can reveal insight into a bond manager’s strategy and expertise in the field. |
Comparison Ranking of the Most Popular Bond Funds
| Bond Fund Sorted Alphabetically | Investment Category | Expense Ratio (Cost) | Year-to-Date Performance |
| BlackRock Secured Credit (BMSAX) | Bank Loan | 0.95% | 3.10% |
| Fidelity Capital and Income Fund (FAGIX) | High Yield | 0.71% | 7.54% |
| Fidelity Strategic Income (FSICX) | Multisector Bond | 0.69% | 5.20% |
| Loomis Sayles Bond (LSBRX) | Multisector Bond | 0.92% | 6.52% |
| Lord Abbett High Yield Fund (LHYAX) | High Yield | 0.95% | 5.95% |
| Osterweis Strategic Income (OSTIX) | High Yield | 0.85% | 3.26% |
| PIMCO Income Fund (PONAX) | Multisector | 0.85% | 7.51% |
| PIMCO Unconstrained Bond (PUBDX) | Nontraditional Bond | 1.30% | 2.79% |
| T. Rowe Price Strategic Income (PRSNX) | World Bond | 0.66% | 6.30% |
| Wells Fargo Advisors CoreBuilder (WFCMX) | Muni National Intermediate | 0.00% | 10.66% |
Please note that the figures and data presented in this article are based on 2014 datasets.
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10 Best Bond Funds – Brief Overview
Loomis Sayles Bond (LSBRX)
Loomis Sayles Bond fund invests in a wide range of bond securities.
As a multi-sector top bond fund, Loomis Sayles’s bond managers are less concerned about investing in one or two particular types or the duration of bonds; rather, they focus on a wide selection of treasury securities (domestic and international) and corporate debt obligations as well as on convertible and asset-backed securities.
PIMCO Unconstrained Bond (PUBDX)
The PIMCO Unconstrained Bond Fund is one of the best bond funds available.
It provides a unique opportunity for investors to gain access to a wide variety of debt securities in a single investment, including U.S. and international treasuries, securitized debt, and corporate bond holdings.
The fund is managed by PIMCO, one of the most highly rated bond fund managers in the world.
T. Rowe Price Strategic Income (PRSNX)
Ranked as a five-star fund on Morningstar, the T. Rowe Price Strategic Income Fund focuses on short duration and high-quality bond securities from a variety of sources.
The top bond fund holds government treasuries, corporate bonds, agency mortgage-backed debt, and other asset-backed securities.
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Fidelity Strategic Income (FSICX)
Fidelity is best known for long-term, high-performing equity funds and quality management with low expenses but offers investors a highly rated bond fund option with its Fidelity Strategic Income Fund.
The top rated strategic income multi-sector bond fund invests in non-U.S. government treasuries, domestic treasuries, and higher-yield corporate bonds.
Osterweis Strategic Income (OSTIX)
Osterweis has been a top rated fund management company for years, providing investors access to a plethora of investment opportunities.
The firm’s Osterweis Strategic Income Fund is ranked as one of the best bond funds available.
It operates similarly to Fidelity’s offering listed above but in the high-yield sector.
The fund’s objective is to invest in high- and mid-grade corporate bonds that have strong growth potential.
Lord Abbett High Yield Fund (LHYAX)
As a four-star rated fund on Morningstar, the Lord Abbett High Yield Bond Fund invests specifically in potentially high-performing corporate bond offerings.
With a low expenses ratio compared to industry averages, as well as a top fund management team, this top bond fund is an excellent addition to any portfolio.
Fidelity Capital and Income Fund (FAGIX)
Another top pick for bond fund investors is Fidelity’s Capital and Income Fund.
The fund’s investments holdings are comprised of high-yield corporate debt securities.
This top bond fund has a lower-than-average expense ratio and long-standing management with consistent yield as well as a five-star rating on Morningstar.
Wells Fargo Advisors CoreBuilder (WFCMX)
Wells Fargo Advisors is one of the world’s most highly rated fund management firms, so it is no surprise that its Advisors CoreBuilder Bond Fund has made the top best bond funds list.
This fund compiles a wide variety of municipal bond fund securities, including those in the education sector, state, and local general obligation funds, transportation, water, sewer, and utilities debt.
Municipal bond funds offer investors the ability to buy into historically stable debt securities that provide additional tax advantages to investors.
PIMCO Income Fund (PONAX)
The PIMCO Income Fund is a highly ranked, multi-sector bond fund that provides investors with the opportunity to invest in a wide variety of sectors, including non-agency residential offerings, asset-backed debt, corporate bonds, U.S. treasuries, and other government-related debt obligations.
As a five-star fund on Morningstar, this top performing best bond fund can be a great addition to an investor’s overall portfolio.
BlackRock Secured Credit (BMSAX)
The BlackRock Secured Credit bond fund is a unique fund offering.
It provides investors with the opportunity to access institutional-level investments combined with low expense fees and consistent performance.
The top bond fund invests primarily in bank loan debt obligations as well as corporate, high-yielding bonds and asset-backed securities.
Conclusion
For investors seeking portfolio diversification as well as potential stabilization, these top bond funds can be appropriate additions.
With a wide range of underlying investments and fund objectives, there is a top bond fund for every investor type.
Each of the funds in the above list of top best bond funds has time-tested professional management, lower-than-average expenses ratios, and short- to mid-term durations.
Each of these aspects should be considered when selecting the best bond fund to invest in, along with current and historical performance.
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