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Investing in diversified bond funds is more 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.

Moreover, 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.

Below, we share with you three top-ranked diversified bond mutual funds, namely Ave Maria Bond Fund (AVEFX - Free Report), SEI Asset Allocation Trust Conservative Strategy Fund (SVSAX - Free Report), and PIMCO Fixed Income Shares (FXIEX - Free Report). Each has earned 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.

Ave Maria Bond Fund seeks the preservation of principal with a reasonable level of current income. AVEFX invests mainly in investment-grade debt securities of primarily domestic issuers. It may also invest a portion of its net assets in preferred stocks, convertible securities, common stocks paying dividends, and securities that appear comparatively undervalued. The fund has returned 2.9% over the past three years.

Brandon Scheitler has been one of the fund managers of AVEFX since 2013.

SEI Asset Allocation Trust Conservative Strategy Fund primarily invests in other SEI Funds, which have their individual investment goal. These Underlying SEI funds invest, in turn, in securities and other instruments of various asset classes. The fund has returned 0.9% over the past three years.

As of September 2022, SVSAX held 14 issues and has 17.2% of its assets invested in SEI INSTL MGD TR M-A CAP.

PIMCO Fixed Income Shares usually do not purchase bonds subject to the federal alternative minimum tax. FXIEX invests the majority of its net assets in a portfolio of U.S. fixed-income instruments comprising debt securities whose interest is, at the time of issuance, exempt from federal income tax. The fund has returned 2.1% over the past five years.

FXIEX has an expense ratio of 0.04% compared with the category average of 0.68%.

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