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Mutual funds investing in debt securities are among the most secure investment options, which provide regular income while protecting the capital invested. Funds that are part of this category bring a great deal of stability to portfolios with a large proportion of equity, while providing dividends more frequently than individual bonds.

U.S. government bond funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered the safest in the bond fund category and are ideal for risk-averse investors.

Meanwhile, a short-term government bond fund is a mutual fund that is limited by its investment objectives and fund bylaws to investing primarily in the short-term obligations of the federal government or its agencies. Depending on the fund's definition, the short term can be up to five years.

Below, we share with you three short-term government bond mutual funds, viz. Vanguard Short-Term Federal Fund (VSGBX - Free Report), GMO U.S. Treasury Fund (GUSTX - Free Report), and PGIM Short Duration High Yield Income Fund (HYSAX - Free Report). Each has earned a Zacks Mutual Fund #1 Rank (Strong Buy) and is expected to outperform its peers in the future.

Vanguard Short-Term Federal Fund invests most of its net assets in short-term bonds issued or guaranteed by the U.S. government and its agencies backed by the faith and credit of the U.S. government. VSGBX seeks to maintain a dollar-weighted average maturity of 1 to 4 years.

Vanguard Short-Term Federal Fund has five-year annualized returns of 0.7%. As of the end of July 2022, VSGBX has invested 8.3% of its net assets in U.S. Treasury Note Bonds.

GMO U.S. Treasury Fund invests most of its net assets in Direct U.S. Treasury Obligations and collateralized repurchase agreements that include U.S. Treasury bills, bonds and notes and other securities issued by the U.S. Treasury, as well as Separately Traded Registered Interest and Principal Securities and other zero-coupon securities. GUSTX advisors seek to maintain an estimated interest rate duration of one year or less.

GMO U.S. Treasury Fund has three-year annualized returns of 0.6%. GUSTX has an expense ratio of 0.01% compared with the category average of 0.64%.

PGIM Short Duration High Yield Income Fund seeks current income by investing most of its net assets in a diversified portfolio of below-investment-grade, high-yield, fixed-income instruments with varying maturities. HYSAX also invests in derivatives and other instruments with similar economic characteristics.

PGIM Short Duration High Yield Income Fund has three-year annualized returns of 1.62%. Ryan Kelly has been the fund manager of HYSAX since October 2012.

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