Top 5 Government Bond Mutual Funds (March 2011)

Conservative investors opt for debt securities not only because they safeguard the capital invested but also because they provide regular income flows. Bonds bring a significant amount of stability to an equity-heavy portfolio while providing dividends more frequently than individual bonds. U.S government bonds mutual 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.

Oppenheimer US Government A (OUSGX) seeks high current income. The fund primarily invests in debt securities issued by the U.S. government. Securities issued or guaranteed by the U.S. treasury are among its major investments. The government bond mutual fund has a three year annualized return of 2.03%.

The Fund Manager is Peter A. Strzalkowski and he has managed this government bond mutual fund since 2009.

Managers Intermediate Duration Government (MGIDX) utilizes the majority of its assets to purchase bonds issued by the U.S. Government and its agencies. It may also invest in synthetic instruments having similar characteristics. The average maturity period of the portfolio ranges from three to five years. The government bond mutual fund returned 5.45% over the last one year period.

The government bond mutual fund has a minimum initial investment of $2,000 and an expense ratio of 0.89% compared to a category average of 1.00%.

Sit US Government Securities (SNGVX) seeks to provide current income and safety of the capital invested. The fund only purchases U.S. government securities or instruments issued by its agencies or instrumentalities. A large proportion of its assets are invested in pass-through securities. The government bond mutual fund has a ten year annualized return of 4.73%.

As of December 2010, this government bond mutual fund held 671 issues, with 3.80% of its total assets invested in FNMA 7%.

GMO Inflation Indexed Plus Bond III (GMITX) invests heavily in inflation-protected securities and related investments. The fund aims to provide total return greater than the Barclays Capital U.S. Treasury Inflation Notes index. The government bond mutual fund returned 11.62% over the last one year period.

The government bond mutual fund has an expense ratio of 0.38% compared to a category average of 0.84%.

Legg Mason Western Asset Government Securities A (SGVAX) seeks current return. The fund invests the majority of its assets in securities issued by the U.S. government and its agencies. U.S. Treasury securities and debt securities issued by federal agencies are some of the categories the fund invests in. The government bond mutual fund has a five year annualized return of 5.54%.

The Fund Manager is Stephen A. Walsh and he has managed this government bond mutual fund since 2006.

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

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