3 Diversified Bond Fund Picks to Balance Risk

Mutual funds having significant exposure to diversified bonds are excellent choices for investors seeking steady returns with a relatively low level of risk. Investing in funds that maintain a portfolio of bonds issued across a wide range of market sectors also reduces sector-specific risk.

Moreover, investing in diversified bond funds is preferred to individual bond investing, as building a portfolio of the second type may prove relatively more expensive. A higher level of liquidity also makes diversified bond funds more attractive.

Below, we share with you three top-ranked diversified bond mutual funds, namely Nuveen Preferred Securities NPSAX, Osterweis Strategic Income OSTIX and Ave Maria Bond AVEFX. Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.

Nuveen Preferred Securities invests the majority of its net assets in preferred securities and other income-producing securities. The advisor intends to invest at least 25% of its assets in the securities of companies principally engaged in financial services. It normally invests at least 50% of its net assets in securities rated investment grade. The fund has returned 7% over the past three years. 

Douglas M. Baker has been one of the fund managers of NPSAX since June 2007.

Osterweis Strategic Income invests the majority of its assets in income-bearing securities. OSTIX advisors seek to control risk through rigorous credit analysis, economic analysis, interest rate forecasts and sector trend review. The fund has returned 9.1% over the past three years.

As of March 2025, OSTIX had 37.7% of its assets invested in Total Misc Bonds.

Ave Maria Bond invests in investment-grade debt securities of domestic issuers, including the U.S. government and its agencies and instrumentalities, corporations and municipalities and money market instruments. AVEFX may invest part of its net assets in preferred stocks, common stocks paying dividends and securities convertible into common stock. The fund has returned 5.5% over the past three years.

AVEFX has an expense ratio of 0.41%.

To view the Zacks Rank and the past performance of all diversified bond mutual funds, investors can click here to see the complete list of diversified bond mutual funds.

Want key mutual fund info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research

Source Zacks-com