LB Bond Mutual Fund & ETF Ratings

lb ratings table

If you are not sure where to start, read our Free Guide to Investing in Bond Funds.

Our Top 3 Core Bond Fund Choices

Fund Name  Active or Passive?  LB Rating LB Rating Report
DoubleLine Total Return Bond Fund (DLTNX) Active Screen shot 2013-01-17 at 9.41.30 AM DLTNX LB Rating Report
PIMCO Total Return Fund (PTTDX) Active Screen shot 2013-01-17 at 9.41.30 AM PTTDX LB Rating Report
Vanguard Total Market Bond Fund (BND) Passive Screen shot 2013-01-17 at 9.41.30 AM BND LB Rating Report

See all our core bond fund ratings here.

core bond fund should be composed of a diversified portfolio of  investment grade bonds and have an intermediate term duration.

Who are core bond funds right for?  Every investor should have at least a portion of their portfolio invested in a core bond fund.  For lower income investors without a market view, 100% of their bond fund allocation could be made to a core bond fund.  High net worth investors may only have a small portion of their funds invested in a core bond fund and opt for more tax efficient options like municipal bond funds instead.

You can see all the core bond funds we rate here.

 

Our Top 3 Municipal Bond Fund Choices

Fund Name Active or Passive?  LB Rating LB Rating Report
Vanguard High-Yield Tax-Exempt Investor Shares (VWAHX)  Active Screen shot 2013-01-17 at 9.41.30 AM  VWAHX Rating Report
Delaware National High Yield Municipal Bond Fund (DVHIX)  Active Screen shot 2013-01-17 at 9.41.30 AM DVHIX Rating Report 
Vanguard Limited Term Tax Exempt Fund VMLUX  Active Screen shot 2013-01-17 at 9.41.30 AM VMLUX Rating Report

 See all our municipal bond fund ratings here.

municipal bond fund should be composed of tax-exempt investment grade municipal bonds and have an intermediate term duration.

Who are municipal bond funds right for? A high net worth investor may consider putting the majority of their bond fund allocation into a municipal bond fund, for the tax benefits they offer.  A low income investor would likely allocate no money to municipal bond funds.

You can see all the municipal  bond funds we rate here.

 

Our Top 3 Short Term/Low Duration Bond Fund Choices

Fund Name Active or Passive?   LB Rating LB Rating Report
MassMutual Premier Short-Duration Bond S (MSTDX) Active Screen shot 2013-01-17 at 9.41.30 AM LB Rating Report for MSTDX
Vanguard Limited Term Tax Exempt Fund VMLUX Active  Screen shot 2013-01-17 at 9.41.30 AM VMLUX Rating Report
Lord Abbett Short Duration Income Fund (LDLFX)  Active Screen shot 2013-01-17 at 9.41.30 AM LDLFX LB Rating Report 

 See all of our Short Term/Low Duration bond fund ratings here.

In most cases, we believe short-term “cash” should be kept in an FDIC insured bank account. However, there may be times when your cash exceeds the limits of FDIC insurance or is too much money to sit idle. As there are issues with both money market funds and ultra-short term bond funds, we recommend that you chose a short-term or low-duration bond fund for this purpose. Allocation should vary between 0 and 15% of an investor’s portfolio, depending on how much cash you have sitting idle, if any.

You can see all the short term/low duration bond funds we rate here.

 

Our Top 3 High Credit Risk Bond Fund Choices

Fund Name Active or Passive?  LB Rating LB Rating Report
Delaware High-Yield Opportunities Fund (DHOIX) Active Screen shot 2013-01-17 at 9.41.30 AM DHOIX Free Rating Report
Fidelity Capital and Income Fund (FAGIX) Active Screen shot 2013-01-17 at 9.41.30 AM FAGIX LB Rating Report
Delaware National High Yield Municipal Bond Fund (DVHIX) Active  Screen shot 2013-01-17 at 9.41.30 AM DVHIX Rating Report 

 See all of our high credit risk bond fund ratings here.

Some bond funds offer extremely high yields.  Examples are Bank Loan FundsHigh Yield Corporate Bond Funds, and High Yield Municipal Bond Funds.  Their higher yields are normally achieved by taking additional credit risk, which makes their total return performance highly correlated with the stock market.   As a result, if you chose to invest in a bond fund with a lot of credit risk, we suggest that you consider it a “stock type” investment. In other words, if you were planning to have a portfolio that was 40% bonds and 60% stocks, you should include these funds as part of the 60% stock allocation. We also suggest not allocating more than 15% of any  portfolio to high credit risk funds.

Who are high credit risk bond funds appropriate for? Investors who are looking for “equity like” returns which can have less volatility than a standard equity allocation.

 You can see all the high credit risk bond funds we rate here.

 

Long Duration Funds

Fund Name Active or Passive? LB Rating LB Rating Report
PIMCO Long Duration Total Return Fund P PLRPX  Active Screen shot 2013-01-17 at 9.41.30 AM PLPRX LB Rating Report
Rochester National Municipal Bond Fund (ORNYX)  Active  Screen shot 2013-01-17 at 9.43.18 AM  ORNYX LB Rating Report

A  long duration fund should be composed of a diversified portfolio of  investment grade bonds and have a long duration.

Who are short and long duration funds appropriate for? If you have a strong view that interest rates are headed lower, you might consider taking a portion of the funds allocated to your core bond fund, and re-allocating them to a fund which reflects your interest rate expectations. If you think interest rates are going to remain steady or fall, you might choose a fund which invests in investment grade bonds with long durations.  Since interest rates are at historical lows, we do not recommend investing in long duration bond funds at this time.

 

Sample  Asset Allocations

This is just a starting point which should be adjusted according to a number of factors including your need for income and risk tolerance. Full Explanations below the table.

You are in a High Tax Bracket
& Don’t Have A Market View
Medium Tax Bracket
& Don’t Have A Market View
High Tax Bracket & Have A Market View Medium Tax Bracket & Have A Market View
Stock Allocation 60% 60% 50% 50%
Core Bond Fund 20% 40% 10% 30%
Municipal Bond Fund 20% 0% 20% 0%
Low Duration Fund Varies Varies Varies Varies
High Credit Risk Fund 0% 0% 10% 10%
Short Or Long Duration Fund 0% 0% 10% 10%

We believe that most investors should own between 2 and 5 bond funds, each in a separate category.

    Want to learn how to generate more income from your portfolio so you can live better?  Get our free guide to income investing here.

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