Top 5 Highest Yielding Diversified Bond Mutual Funds (Jan. 2011)

Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for a regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund’s fortunes.

Mutual Fund SEC Yield
Putnam Diversified Income A 7.64%
John Hancock Strategic Income A 6.16%
Federated Strategic Income A 5.83%
Virtus Multi-Sector Fixed Income A 5.41%
Oppenheimer Global Strategic Income A 5.26%

Below we will share with you the 5 highest yielding Zacks #1 ranked diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform its peers in the future.

Putnam Diversified Income A (PDINX) seeks current income. The fund invests 15 to 65% of its assets in government securities and domestic and foreign corporate bonds. The fund primarily purchases corporate bonds which are rated investment grade, but may also invest in securities of lower quality. The diversified bond mutual fund returned 13.2% in the last one year period.

The diversified bond mutual fund has a minimum initial investment of $500 and an expense ratio of 1.01% compared to a category average of 1.13%.

John Hancock Strategic Income A (JHFIX) invests in foreign debt securities of developed and emerging markets, U.S. government and agency securities and U.S. high yield bonds. The fund may also invest in preferred stock and other types of debt securities. The diversified bond mutual fund has a three year annualized return of 9.65%.

Daniel S. Janis, III is the fund manager and has managed this diversified bond mutual fund since 1999.

Federated Strategic Income A (STIAX) seeks high current income. The fund invests in three major categories of fixed-income securities. These include domestic securities rated below investment grade as well as those rated higher and foreign securities. The diversified bond mutual fund returned 11.41% in the last one year period.

The diversified bond mutual fund has a minimum initial investment of $1,500 and an expense ratio of 1.27% compared to a category average of 1.13%.

Virtus Multi-Sector Fixed-Income A (NAMFX) invests at least 80% of its assets in fixed income securities. It purchases U.S. government securities, investment-grade as well as high yield domestic debt securities. The diversified bond mutual fund has a five year annualized return of 6.74%.

As of September 2010, this diversified bond mutual fund held 364 issues, with 2.41% of its total assets invested in Blackrock Liquidity Tempfund Portfolio – Institutional Shares.

Oppenheimer Global Strategic Income A (OPSIX) seeks a high level of current income. It invests the majority of its assets in securities issued by the US government and high yield domestic and foreign securities. The diversified bond mutual fund has a ten year annualized return of 7.09%.

Arthur K. Steinmetz is the fund manager and has managed this diversified bond mutual fund since 1989.

To view the Zacks Rank and past performance of all diversified bond mutual funds, then click here.

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