Which is the best fixed income fund?

Choosing the "best" fixed income fund depends on several factors, including your investment goals, risk tolerance, time horizon, and specific needs such as capital preservation, income generation, or diversification. Here are some considerations and top-rated options in different categories:

Short-Term Bond Funds

For investors seeking low risk and short-term investments, the following funds are highly rated:

• Schwab Short-Term US Treasury ETF (SCHO): This passive ETF tracks the Bloomberg US Treasury 1-3 Year Index, has virtually no credit risk, and very low expenses (0.03% expense ratio)2.
• SPDR Portfolio Treasury ETF (SPTS): Another low-cost passive ETF investing in short-term Treasuries, with minimal credit and interest-rate risk (0.03% expense ratio)2.
• Vanguard Short-Term Treasury Index/ETF (VGSH): Invests exclusively in short-term US Treasuries, tracking the Bloomberg US Treasury 1–3 Year Index, with low expenses (0.04% expense ratio for the ETF)2.

Active Short-Term Bond Funds

For those willing to take on a bit more risk for potentially higher returns:

• Baird Short-Term Bond (BSBSX): Actively managed, investing in high-quality corporate bonds, securitized credit, and government bonds. It has a higher expense ratio (0.55%) but is known for adept security selection and sector allocation2.
• JP Morgan Limited Duration Bond ETF (JPLD): Focuses on short-term mortgage and asset-backed securities, with a lower expense ratio (0.24%) and less volatility compared to peers2.
• PGIM Short Duration Multi-Sector Bond Fund/ETF (SDMZX/PSDM): Attempts to outperform its benchmark with a flexible mandate, including non-US developed and emerging markets debt, and has an expense ratio of 0.40%2.

High-Yield Fixed Income

For investors seeking higher yields but willing to accept higher risk:

• High-yield bonds (junk bonds): These offer higher interest rates due to the higher credit risk of the issuers. However, they carry a greater risk of default5.

General Fixed Income Funds

For a broader fixed income strategy:

• Fidelity Total Bond Fund: Managed by a team that won the Morningstar 2016 U.S. Fixed-Income Fund Manager of the Year award. It uses a diversified fixed income strategy to deliver risk-adjusted returns1.
• Vanguard Fixed Income Funds: Vanguard offers a range of fixed income funds, many of which have a Gold Medalist rating from Morningstar. They are known for low fees and strong long-term performance4.

Active Fixed Income by BlackRock

For investors looking for active management with deep expertise:

• iShares Flexible Income Active ETF (BINC): Led by Rick Rieder, Morningstar’s 2023 Outstanding Portfolio Manager, this ETF seeks to provide access to harder-to-reach fixed income sectors3.

When selecting a fixed income fund, consider the following:

• Risk Tolerance: If you are risk-averse, Treasury or high-quality corporate bond funds might be more suitable.
• Time Horizon: Short-term funds are better for shorter time horizons, while longer-term funds can be considered for longer horizons.
• Fees: Lower expense ratios can significantly impact long-term returns.
• Investment Goals: Whether you are looking for capital preservation, income generation, or diversification will influence your choice.

It is always advisable to consult with a financial advisor to determine the best fit for your specific financial situation and goals.