Buy 4 Investment Grade Corporate Bond Funds on Strong Inflows – May 10, 2019

U.S.-based investment-grade corporate bond funds witnessed more than $3.3 billion worth of investments in the week ended May 8, continuing the strong weekly inflows that began in late January, Refinitiv’s Lipper research service data stated.

Currently, U.S.-China trade tensions are discouraging investors from putting their money in U.S.-based equity funds, which posted more than $12.7 billion of outflows in the week ended May 8. This marks the third consecutive week of cash withdrawals and indicates investors’ low risk appetite.

According to Lipper, the latest weekly equity funds outflow is the worst since Jan 30. In stark contrast, inflows into U.S.-based investment-grade corporate bond funds grew in the same timeframe, which points toward investor demand for safe havens.

Investment Rationale

Investment-grade corporate bonds may be riskier than Treasury bonds but these are safer than equity fund investments, especially in the current gloomy scenario. Uncertain trade policies and global growth slowdown worries were major market movers in the second half of 2018, making equity markets highly volatile.

Investment-grade corporate bonds offer stability and opportunity for income to investors, which might not be the expectation from broader equity markets at present.

These bonds are typically issued by high-quality companies with credit ratings between AAA and BBB-. As corporate bonds have credit and default risk, these offer a higher return compared to government bonds with similar maturity.

Our Choices

Given the encouraging factors propelling the professional and business services sector, here are four mutual funds you should consider investing in. We have selected funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three-year returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Invesco Corporate Bond Fund Class Y (ACCHX Free Report) aims for current income along with capital preservation. The fund invests the majority of its assets in corporate bonds. The fund also invests in derivatives and other instruments that have economic characteristics similar to corporate bonds. A minimum of 65% and up to 100% of the fund’s assets may be invested in investment grade securities.

This Zacks sector – Investment Grade-Bonds: Misc product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

ACCHX has a Zacks Mutual Fund Rank #1. The fund has an annual expense ratio of 0.60%, which is below the category average of 0.84%. The fund has three-year returns of 4.3%. The minimum initial investment for the fund is $1000.

Permanent Portfolio Versatile Bond Portfolio Class I (PRVBX Free Report) aims for high current income. The fund invests the majority of its assets in bonds, which may include debt securities of all types and of any maturity.PRVBX may invest in both investment grade and below investment grade bonds.

This Zacks sector – Inv Grade Bond-Short product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRVBX has a Zacks Mutual Fund Rank #1. The fund has an annual expense ratio of 0.65%, which is below the category average of 0.84%. The fund has three-year returns of 4.8%. The minimum initial investment for the fund is $1000.

MFS Corporate Bond Fund Class A (MFBFX Free Report) aims for current income and also focuses on capital growth. The fund invests the majority of its assets in corporate debt instruments.

This Zacks sector – Investment Grade-Bonds: Misc product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

MFBFX has a Zacks Mutual Fund Rank #1. The fund has an annual expense ratio of 0.80%, which is below the category average of 0.84%. The fund has three-year returns of 3%. The minimum initial investment for the fund is $1000.

VALIC Company II Strategic Bond Fund (VCSBX Free Report) aims for the highest possible total return and income that is on par with capital preservation. VCSBX the majority of its net assets in a wide range of fixed-income securities that comprise investment grade bonds (rated BBB or higher by Standard & Poor’s Ratings Services and Baa or higher by Moody’s Investor Services, Inc.), U.S. government and agency obligations, mortgage- and asset-backed securities, and U.S., Canadian and foreign high-yield high-risk junk bonds.

This Zacks sector – Intl Bond-Developed product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

VCSBX has a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.87%, which is below the category average of 1.03%. The fund has three-year returns of 4.2%. The fund has no minimum initial investment.

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