After two weeks of strong starts heading into 2023, Wall Street contracted last week in the first signs of strong economic data coming from the labor market. Even last week’s CPI, which showed that inflation was definitely coming down, wasn’t enough to convince investors with full confidence that the Fed would be dovish and cut interest rates going forward.
We continue to be in a volatile market, with mega-cap companies announcing mass layoffs, making a recession look imminent even with lower inflation. With the mixed signals coming in from the banks, all eyes remain fixed on the February meeting as to what direction to go next.
During these uncertain times, investors are looking to add security to their portfolios. They continue to look for strategies that can generate a steady stream of income while minimizing risk. Investing in the bond market has its downsides in macroeconomic scenarios like the current one. However, once a major bond rating agency qualifies certain bond funds as investment grade, they become a nearly guaranteed investment vehicle.
Investment grade bond funds consist of corporate and government debt, as suggested by bond rating agencies such as Fitch, Moody’s and S&P, which is also very likely to be paid back with interest. These agencies weigh the risk and return potential to rate these bond funds. The highest rated bonds of these are considered investment grade. These are considered less risky than stocks because they are defensive in nature and therefore do not experience the same price movements.
When a company goes bankrupt, creditors have precedence over shareholders. Therefore, in a volatile market, at least the amount invested is completely safe for these bond funds. They also generate a steady stream of income through interest payments. However, it is essential for investors to check the fund’s credit rating when entering the bond market. Lower rated bonds are speculative in nature and serve no purpose of risk mitigation.
US bond funds attracted their biggest weekly inflows in 18 months in early January on signs that inflation has eased. Investors bought $3.63 billion of US short-term investment grade funds in the biggest buy since January 2022 to give stability to their portfolios. Now may not be the time for speculation. On the contrary, this may be the time to add a safety net to one’s portfolio. continue.
So, with a major slowdown looming in the US economy, smart investors can now consider investing in investment grade bond funds. Mutual funds generally reduce transaction costs and diversify your portfolio without the string of fees associated with buying stocks (read more: Mutual Funds: Pros, Cons, and How Investors Make Money).
Thus, three investment grades boasting Zacks Mutual Fund ranks 1 (strong buy), 2 (buy), positive 3- and 5-year annualized returns, a minimum initial investment of $5,000 or less, and carry. I chose a bond fund. Low expense ratio.
Payden Limited Maturity Fund (PYLMX – Free Report) invests in a variety of bonds and income-producing securities that pay primarily in dollars. PYLMX invests the majority of its total assets in investment grade bonds, but may invest a small portion in bonds rated below investment grade. The fund’s overall average credit quality remains investment grade.
PYLMX’s top three holdings are Total Misc Bonds with 50.3%, Total Cash Management with 14.8% and US Cash Management Bill with 3.6%. Mary Syal has been the lead manager of PYLMX since February 27, 2008.
PYLMX’s 3- and 5-year annualized returns are 0.9% and 1.5%, respectively. The net expense ratio is 0.25% against the category average of 0.44%. PYLMX is the #1 ranked Zacks Mutual Fund. Click here to compare the performance of this fund to other 1 and 2 ranked mutual funds.
Virtus Newfleet Short Duration High Income Fund (Ashax – free report) typically invests most of its net worth in debt securities rated below investment grade, while maintaining an average duration of less than three years and investing in derivatives and other synthetic instruments with economic characteristics By doing so, we are trying to achieve our investment objectives. Similar to such bonds.
ASHAX’s top three holdings are Total Misc Bonds with 19.7%, PBF Holding with 3.2% and Millenium Escrow with 3.1%. Francesco A. Ossino, from 24 July 2022 he is the lead manager of ASHAX.
ASHAX’s 3- and 5-year annualized returns are 1.5% and 2.2%, respectively. The net expense ratio is 0.86% against the category average of 0.95%. ASHAX is ranked #1 in Zacks Mutual Fund.
USAA Short Term Bond Fund (USSBX – Free Report) invests most of its assets in a broad portfolio of investment grade bonds with a dollar-weighted average maturity of three years or less. These securities may include US, state and local government debt, mortgage-backed and asset-backed securities, corporate bonds and repurchase agreements. and other securities that are considered to have debt-like characteristics.
USSBX’s top three holdings are Total Misc Bonds at 66.2%, Total Cash at 12.6% and BBVA Bancomer at 1.1%. Julianne W. Bass has been the lead manager of USSBX since January 3, 2007.
USSBX’s 3- and 5-year annualized returns are 0.9% and 1.8%, respectively. The net expense ratio is 0.56% against the category average of 0.68%. USSBX is the #1 Zacks Mutual Fund Rank.
Diverse bond portfolio (PRVBX – Free Report) invests the majority of its assets in a diversified portfolio of corporate bonds rated ‘A’ or higher by S&P and with a remaining maturity of 24 months or less, thereby limiting risk to principal while Aiming to earn a high current income. Dividends and capital gains are distributed annually.
PRVBX’s top three holdings are 11.7% of total preferred stock, BAT Capital 6.9% and El Paso Energy 6.4%. Michael Joseph Cuggino has been PRVBX’s Principal Manager since April 30, 2003.
PRVBX’s 3- and 5-year annualized returns are 2.1% and 3.5%, respectively. The net expense ratio is 0.65% against the category average of 0.68%. PRVBX is Zacks Mutual Fund Rank #1.
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