Bonds are assigned ratings based on credit quality. Bond rating firms, like Standard & Poor's, assign the ratings using upper- and lower-case letters. Usually, 'AAA' and 'AA' (high credit quality) and 'A' and 'BBB' (medium credit quality) are the investment grade bonds. Government bonds, or Treasuries, are not assigned any rating. They generally qualify as the highest credit quality bonds. A downgrade of a company's bonds from 'BBB' to 'BB' reclassifies the debt to “junk” from investment grade. These downgrades can negatively affect bond prices and the effect of even a one-step drop in quality is problematic for the issuer. Bond funds however are a good investment during a low-rate environment. Meanwhile, intermediate-term funds usually provide a safer option for investors, when compared to small-term funds. Fixed income securities having average maturity period between 3 and 10 years are classified as intermediate securities. These funds are believed to assure more stability and provide higher return than what short-term offer.
Below we will share with you 4 top ranked intermediate-term investment grade bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (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 intermediate-term investment grade bond funds, investors can click here to see the complete list of funds.
Baird Aggregate Bond Investor (BAGSX) seeks to provide annual total return higher than that of the Barclays U.S. Aggregate Bond Index. BAGSX invests a lion’s share of its assets in debt securities that are denominated in the US dollar. BAGSX invests in securities issued by the US government and other public sector agencies. BAGSX may also invest in mortgage and asset backed securities, and corporate bonds issued in the US or in foreign lands. BAGSX focuses on acquiring investment grade securities. The Baird Aggregate Bond Investor fund returned 2.5% over the past one year period.
BAGSX has an expense ratio of 0.55% as compared to category average of 0.83%.
Fidelity Intermediate Bond (FTHRX) invests a large chunk of its assets in debt securities that are rated investment-grade. FTHRX is expected to maintain an overall risk profile similar to the Barclays U.S. Intermediate Government/Credit Bond Index. FTHRX generally have a dollar-weighted average maturity of 3-10 years. FTHRX invests in both US and non-US securities across a wide range of market sectors. The Fidelity Intermediate Bond fund returned 2% over the past one year period.
As of last filling, FTHRX has 5.82% of its assets invested in US Treasury Note 1.75%.
Parnassus Fixed-Income (PRFIX) seeks high current income with capital preservation. PRFIX maintains a diversified portfolio by investing a major portion of its assets in bonds and fixed-income producing securities. PRFIX invests in debt securities that are affiliated by the US government or by its entities, corporate bonds and mortgage-backed securities. Though PRFIX generally invests in securities issued by the domestic entities, PRFIX may also invest in foreign securities that are denominated in the US dollar. The Parnassus Fixed-Income fund returned more than 2% over the past one year period.
Samantha D. Palm is the fund manager and has managed PRFIX since 2013.
Janus Flexible Bond D (JANFX) invests a large share of its assets in debt obligations issued by the US government and corporate entities. JANFX also invests in bonds including commercial and residential mortgage-backed securities, and zero-coupon bonds. JANFX invests a minimum of 65% of its assets in debt securities that are rate investment grade. JANFX may invest a maximum of 35% of its assets high-risk securities (known as "junk" bonds). The Janus Flexible Bond D fund returned more than 1.7% over the past one year period.
JANFX has an expense ratio of 0.60% as compared to category average of 0.83%.
To view the Zacks Rank and past performance of all intermediate-term investment grade bond mutual funds, investors can click here to see the complete list of funds.
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 Rank at https://www.zacks.com/funds.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get Your Free (BAGSX): Fund Analysis Report
Get Your Free (FTHRX): Fund Analysis Report
Get Your Free (PRFIX): Fund Analysis Report
Get Your Free (JANFX): Fund Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research