Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund’s fortunes.

Below we will share with you 5 top-ranked diversified bond mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.

PIMCO Diversified Income A (PDVAX - MF report) invests a major portion of its assets in a diversified portfolio of fixed income securities, which may be represented by derivative instrument. The fund may invest in both investment grade and high yield securities. However, at least 10% of its assets are rated below B by Moody's, or equivalently rated by S&P (SPY) or Fitch. If unrated, then the ratings are determined by PIMCO. The diversified bond mutual fund returned 4.1% in the last one year period.

Curtis Mewbourne is the fund manager and has managed this diversified bond mutual fund since 2005.

Prudential Total Return Bond A (PDBAX - MF report) seeks total return. The fund invests a major portion of its assets in fixed-income securities, other than preferred stock, having a maturity of more than one year from the time of issue. It may invest a maximum of 30% of its assets in junk bonds, not rated below CCC, and up to 30% of its assets in foreign debt securities. The diversified bond mutual fund returned 7.2% in the last one year period.

The diversified bond mutual fund has an expense ratio of 0.83% compared to a category average of 0.86%.

Toreador Core Retail (TORLX - MF report) invests mostly in domestic and foreign large-cap companies. The market capitalizations of these companies are identical to those listed in the S&P 500 Index or the Russell 1000 Index (IWM). The fund, however, may at times invest in small-cap and mid-cap companies. It may also invest in convertible securities, preferred stocks, and exchange-traded funds (ETFs). It seeks long-term capital growth and uses options to hedge its portfolio from risks. The diversified bond mutual fund returned 14.2% in the last one year period.

As of February 2015, this diversified bond mutual fund held 94 issues, with 5.38% of its total assets invested in Intel Corp (INTC).

Baird Core Plus Bond Investor (BCOSX - MF report) seeks annual rate of return more than that of the Barclays U.S. Universal Bond Index. The fund invests a lion’s share of its assets in U.S. dollar-denominated debt securities including U.S. government, mortgage-backed domestic and foreign issuers, and corporate debt of both U.S. and non-U.S. issuers. It generally invests in investment-grade debt securities, but may also invest a maximum 20% of its assets in non-investment-grade debt securities like “high yield” bonds. The diversified bond mutual fund returned almost 6.2% in the last one year period.

The diversified bond mutual fund has an expense ratio of 0.55% compared to a category average of 0.86%.

Spirit of America Income A (SOAIX -MF report) invests a major portion of its assets in taxable municipal bonds, income generating convertible securities, high yield domestic corporate bonds, preferred stocks and CMO’s. The fund may invest in U.S. government agency securities issued or guaranteed by the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation and the Government National Mortgage Association. It may also invest in MLPs. The diversified bond mutual fund returned 12.5% in the last one year period.

As of February 2015, this diversified bond mutual fund held 298 issues, with 2.15% of its total assets invested in Tobacco Settlement Fing Corp V As 6.706%

To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.