Top 5 Highest Yielding Diversified Bond Mutual Funds (June 2011)

Bonds are the logical choice of investors who are willing to forgo capital growth for a regular income stream. The cost of individually purchasing bonds from various categories may become a particularly expensive proposition. This is why mutual funds are the most affordable method of investing in bonds. Diversified bond mutual funds further reduce the risk involved since their portfolios consist of securities from various classes and sectors. This ensures that any negative fluctuation in a specific sector only has a partial effect on the fund’s fortunes.

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.

Mutual Fund SEC Yield
Putnam Diversified Income A 7.64%
T. Rowe Price Spectrum Income 7.4%
Virtus Multi-Sector Fixed Income A 5.34%
Oppenheimer Global Strategic Income A 5.26%
MainStay Flexible Bond Opportunites A 5.19%

Putnam Diversified Income A (PDINX) 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 12.24% 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%.

T. Rowe Price Spectrum Income (RPSIX) seeks high current income with relatively modest changes in share price levels. The fund invests in a wide range of T. Rowe Price mutual funds which invest in different market segments. The diversified bond mutual fund has a three year annualized return of 5.36%.

Edmund M. Notzon, III is the fund manager and he has managed this diversified bond mutual fund since 1998.

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 7.4%.

As of December 2010, this diversified bond mutual fund held 446 issues, with 1.40% of its total assets invested in Australia(Cmnwlth) 5.75%.

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 7.56%.

The diversified bond mutual fund has a minimum initial investment of $1,000 and an expense ratio of 0.95% compared to a category average of 1.17%.

MainStay Flexible Bond Opportunities A (MASAX) invests a large proportion of its assets in a wide range of bonds and related instruments with different maturity periods. Not more than 20% of its assets may be utilized to purchase equity securities. The diversified bond mutual fund returned 7.59% in the last one year period.

Louis Cohen is the fund manager and he has managed this diversified bond mutual fund since 2009.

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

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 http://www.zacks.com/funds/mutualfunds.

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