The Best Fixed-Income Funds

Fixed-income funds, which are mutual funds that own securities such as municipal bonds and other fixed-income securities, are important for diversifying your investment portfolio. Here’s a look at five of the best fixed-income funds.

iShares 1-3 Year Treasury Bond ETF (SHY)

Since U.S. Treasury bonds are considered very secure, iShares’ SHY, a fund that holds T-bonds with one-to-three-year remaining maturities, is among the safest income funds. However, the coupon rate is low, according to U.S. News & World Report. This fund is a good, strategic income fund vehicle for investment diversification and better than parking your money in a savings account. These short-term bond income funds have low vulnerability to interest rate fluctuations, although nearly all bond funds lost some money in 2018, states Kiplinger.

Vanguard Intermediate-Term Corporate Bond ETF (VCIT)

For a slightly riskier fund, Vanguard’s VCIT is a good choice. It’s still a relatively safe place to invest as the fund purchases debt from well-established U.S. companies like Verizon Communications, states U.S. News & World Report. However, it’s still a more aggressive investment option than buying U.S. Treasury bonds. VCIT bonds have a remaining maturity of five to 10 years, which carries a risk of interest rate fluctuations, states U.S. News & World Report. However, overall, this is one of the top fixed-income funds.

SPDR Bloomberg Barclays High Yield Bond ETF (JNK)

If you’re looking for a fund with slightly higher risk and yield, the JNK is a smart choice. This is one of the best income funds that buys bonds with a higher risk of default, compared to investment-grade bonds, and are considered “junk” bonds as rated by Moody’s, Standard & Poor’s and Fitch, according to U.S. News & World Report. With the additional risk, since a junk bond could default, you’ll see an impressive five percent or higher yield.

T. Rowe Price Short-Term Bond (PRWBX)

This fund combines a variety of bonds, including U.S. Treasury bonds and mortgage-backed securities, with a yield of almost three percent, states Fidelity. Invest in this short-term fund, and you can rest assured that your investment delivers a modest yield while being a safe place to buy bonds if you’re considering low-risk guaranteed income funds.

VanEck Vectors Fallen Angel High Yield Bond ETF (ANGL)

For another investment choice that’s neither overly risky or too conservative, a fund like ANGL that holds “fallen angel” bonds is a good consideration. These bonds were originally investment grade but were reduced to junk status, which means they have a higher default risk than investment-grade securities. Fallen angel bonds, however, are higher rated than the average junk bond and give you a higher yield, states U.S. News & World Report.