5 Zacks Ranked #1 Government Bond Mutual Funds to Buy Now - Mutual Fund Commentary

Conservative investors prefer debt instruments not only because they safeguard the capital invested but also for the regular income flows they provide. Bonds bring a great deal 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. To view the Zacks Rank and past performance of all government bond funds, investors can click here to see the complete list of funds.

Nuveen Inflation Protected Securities A (FAIPX) seeks total return. The fund invests a lion's share of its assets in inflation protected instruments affiliated by governments or by their entities and companies. It may also invest a maximum of 20% of its assets in instruments which are not inflation protected. The government bond mutual fund returned 1.6% over the last one year period.

The fund has an expense ratio of 0.83% as compared to category average of 0.78%.

PIMCO Long-Term US Government A (PFGAX) invests heavily in fixed income instruments of the U.S. government or its affiliates. It may also invest without any limitation, in derivatives including options, swap agreements and mortgage backed securities. The fund seeks total return with capital preservation. The government bond mutual fund returned 12.1% over the last one year period.

Stephen A. Rodosky is the fund manager and has managed this fund since 2007.

Vanguard Long-Term Treasury (VUSTX) seeks a high level of current income which is sustainable. The fund invests a large share of its assets in U.S. Treasury securities such as bills and bonds. It aims to have an average weighted maturity period between 15 to 30 years. The government bond mutual fund returned 12.4% over the last one year period.

As of June 2014, this fund held 35 issues with 10.42% of its assets invested in US Treasury Bond 2.75%.

T. Rowe Price US Treasury Long-Term (PRULX) invests a major portion of its assets in government affiliated U.S. Treasury securities. The rest of the assets are invested in other government backed instruments. It has a maturity between 15-20 years and may also vary from 10-30 years. The government bond mutual fund returned 11.6% over the last one year period.

The fund has an expense ratio of 0.52% as compared to category average of 0.56%.

Dreyfus US Treasury Long-Term (DRGBX) seeks total return with capital growth and current income. It invests a majority of its assets in U.S. Treasury instruments. It may also invest in other instruments which are approved by the domestic government or issued by its entities. It generally has duration of more than or equal to 7.5 years and minimum of 10 years of weighted duration of maturity. The government bond mutual fund returned 12% over the last one year period.

Robert Bayston is the fund manager and has managed this fund since 2008.

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.

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 in our Mutual Fund Center.