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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 Aristotle Strategic Income (PLSFX - Free Report), BBH Limited Duration (BBBMX - Free Report), and BlackRock Floating Rate Income (BFRAX - Free Report). Each has a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future.

Aristotle Strategic Income invests in debt instruments that generate income. PLSFX’s allocations to non-investment grade debt instruments and investment grade debt instruments vary on the advisor’s view of market conditions. The fund has returned 1.3% over the past three years.

Michael Marzouk has been one of the fund managers of PLSFX since 2016.

BBH Limited Duration aims for maximum total return. BBBMX invests in a well-diversified portfolio of durable, performing fixed-income instruments, primarily focused on asset-backed securities, notes and bonds. The fund has returned 3.1% over the past three years.

As of January 2024, BBBMX had 59.3% of its assets invested in Total Misc Bonds.

BlackRock Floating Rate Income invests primarily in floating rate investments and investments that are the economic equivalent of floating rate investments. The fund has returned 5.4% over the past three years.

BFRAX has an expense ratio of 0.93% compared with the category average of 0.98%.

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