The Best Taxable-Bond Funds
Here are the highest-rated mutual funds and ETFs across a series of Morningstar’s taxable fixed-income categories.
Too many things in life that should be easy for adults aren’t. Opening medicine bottles with “child safety” caps, for instance. Detaching toys from their viselike packaging on Christmas morning. Getting teenage boys to do their laundry (maybe that’s just my teenage boys).
Choosing a bond fund should be on that list, too.
Investors rely on bonds for many reasons: funding short-term goals, diversifying an equity-heavy portfolio, or generating income or providing inflation protection during retirement, to name a few. Before getting down to choosing a bond fund, step back and consider why you need one: What role is it playing for you?
Once you know what need it's filling, figure out whether a taxable-bond fund or municipal-bond fund is a better choice for you. If you’re investing in a taxable account, municipal bonds might be the better choice on an aftertax basis. We’ll cover best practices for muni-bond fund investing and shares some picks in an upcoming article.
If you’re investing via a tax-deferred account like an IRA or 401(k), however, a taxable-bond fund will be the better match. Some of the issues to wrangle are covered in our checklist for taxable-bond investors, including what levels of credit and interest-rate risk you’re comfortable with and whether you want just one core bond fund or several supplementary holdings.
Once you’ve decided on some of the big issues, you can begin the search for a fund that meets your needs. We suggest that you start your quest with Morningstar Medalist Funds. These funds are those that we think are most likely to outperform over a full market cycle thanks to their competitive advantages such as low costs and solid processes.
These taxable-bond funds all have at least one share class that earns our highest rating--a Morningstar Fund Analyst Rating of Gold--as of this writing. They’re great starting points for your research.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.