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3 Bond Funds On Their Way To A Big-Time 2014

November 3, 2014 9:41 am
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3 Bond Funds On Their Way To A Big-Time 2014

One easy way to get exposure to the bond market is through mutual funds.

This differs from purchasing a particular bond in one key respect: When one owns a bond, it has a particular yield. A change in its price only concerns investors if they opt to sell the bond.

Additionally, with a bond fund, there is no maturity date because the fund consists of bonds with various maturity dates (and it is trading in and out of these investments).

Short-term bonds generally carry a lower yield than their longer-term peers. However, bonds with a maturity date of three years or less generally have lower volatility, meaning a reduced likelihood of gut-wrenching price fluctuations.

Frost Total Return

One of the top-performing short-term bond funds is the Frost Total Return Bond Fund (MUTF: FATRX), with a one-year return of 5.88 percent.

Related Link: A Look At 3 Top-Performing Long-Term Bond Funds

This is an actively managed fund, and more than 50 percent of its holdings have a maturity of five years or less. The fund focuses mainly on investment grade bonds, but also includes some that are below investment grade.

BlackRock U.S. Mortgage

The BlackRock U.S. Mortgage Portfolio (MUTF: BMPAX), meanwhile, has a one-year total return of 5.50 percent.

This fund invests mainly in domestic mortgage-backed securities with a significant holding in non-agency, below-investment-grade, mortgage-related securities. That means securities sponsored by private companies and not government-related entities, including Freddie Mac and Fannie Mae.

Leader Short Term

Another top performing fund from the short-term-bond category is the Leader Short Term Bond Fund (MUTF: LCCMX). This fund boasts a one-year total return of 4.28 percent.

The fund's primary objective is current income, with a secondary objective of capital appreciation. Managers invest in foreign and domestic investment and non-investment grade debt. Effective average duration is generally three years or less, putting it in the short-term category.