Conservative investors prefer debt instruments not only because they safeguard the capital invested but also for the regular income flows they provide. Bonds bring a great deal of stability to an equity-heavy portfolio while providing dividends more frequently than individual bonds. U.S government bonds funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered to be the safest in the bond fund category and are ideal options for the risk-averse investor.
Below we will share with you 5 top rated government 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 government bond funds, investors can click here to see the complete list of funds.
Putnam American Government Income A (PAGVX) seeks substantial current income. A large share of the fund’s assets is utilized to purchase bonds as well as asset backed debt securities that are issued by the U.S. government and also by its agencies. The fund may also invest in derivatives. The government bond mutual fund returned 0.69% over the last one year period.
The fund has an expense ratio of 0.87% as compared to category average of 0.95%.
Western Asset Mortgage Backed Securities (SGVAX) seeks current income. A majority of assets are invested a large share of its assets in mortgage-backed securities issued by government backed institutions such as Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). The government bond mutual fund returned 2.57% over the last one year period.
Stephen Walsh is the fund manager and has managed this fund since 2006.
Lord Abbett Income A (LAGVX) seeks high return along with capital preservation. A minimum of 65% of its assets is invested in debt securities backed by the U.S. Government. Investments are also made in derivatives. The government bond mutual fund returned 2.38% over the last one year period.
As of December 2013, this fund held 505 issues with 2,75% of its assets invested in FNMA.
Driehaus Active Income (LCMAX) seeks both income and capital growth. It invests the majority of its assets in US floating rate and fixed income securities. Investments are also parked in investment graded and junk bonds. The government bond mutual fund returned 2.41% over the last one year period.
The fund has an expense ratio of 0.79% as compared to category average of 1.30%.
Lord Abbett Short Duration Income A (LALDX) invests a minimum of 65% of its assets in different kind of investment grade debt securities including the ones which are backed by the U.S. government or government sponsored securities. The government bond mutual fund returned 1.82% over the last one year period.
Andrew A. O'Brien is the fund manager and has managed this fund since 1998.
To view the Zacks Rank and past performance of all government bond mutual funds, investors can click here to see the complete list of funds.
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