Mutual funds investing in debt securities are among the most secure investment options which provide regular income while protecting capital invested. Funds which are part of this category bring a great deal of stability to portfolio which a large proportion of equity, 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.
Sentinel Total Return Bond A (SATRX) seeks high return from a combination of capital growth and current income. The fund invests predominantly in different kind of fixed-income securities regardless of its duration. Half of its assets may be invested in junk bonds. The government bond mutual fund returned 4.52% over the last one year period.
The fund has an expense ratio of 0.89% as compared to category average of 0.88%.
Lord Abbett Floating Rate A (LFRAX) invests a majority of its assets in senior loans which carry an adjustable or floating rate. A maximum of 20% of its assets are invested in unsecured senior loans. At least 20% is also invested in different types of debt and short term securities. Derivatives attract investment of not more than 10% of its total assets. The government bond mutual fund returned 4.59% over the last one year period.
As of December 2013, this fund held 430 issues with 1.49% of its assets invested in Neiman Marcus Group Inc.
Waddell & Reed Government Securities A (UNGVX) seeks current income with capital preservation by investing in various domestic government securities. The fund also invests in mortgaged-backed securities of US government agencies and has no restriction while investing on the various maturities of debt securities. The government bond mutual fund returned -2.79% over the last one year period.
Mark J. Otterstrom is the fund manager and has managed this fund since 2008.
Prudential Absolute Return Bond A (PADAX) seeks long-term returns. The fund invests heavily in debt or instruments that give exposure to bonds. A maximum of half of its assets may be utilized to purchase junk bonds. The government bond mutual fund returned 1.24% over the last one year period.
The fund has an expense ratio of 1.14% as compared to category average of 1.32%.
Franklin Real Return A (FRRAX) invests in purchasing investment grade debt instruments. A maximum of 20% of its assets may be invested in junk bonds. Additionally, a minimum of 25% is also invested in foreign securities which may be denominated in domestic and foreign currencies. The government bond mutual fund returned 0.07% over the last one year period.
As of December 2013, the fund held 185 issues with 12.43% of its assets invested in US Treasury Note 1.875%.
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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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 Rank.
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