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These Core Bond Funds Earn Top Marks

We use our screening tool to go for the Gold and Silver.

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Yield-starved investors have been gravitating to emerging-markets and high-yield bond funds of late, no doubt attracted by their better yields and stronger long-term returns relative to high-quality offerings. Such high-flying offerings can be a reasonable way to add some get-up-and-go to a fixed-income portfolio. But if counterbalancing equity exposure and reducing equity risk is a goal, there's no substitute for core high-quality fixed-income exposure. Such offerings will no doubt struggle in a rising-yield environment, but they're the best counterweight to equities.

To help identify worthy bond funds that fall under the core-holding heading, we started with intermediate-term taxable-bond funds, which deliver higher yields than short-term offerings and have much less volatility than what accompanies long-term bonds. (Whether your core bond funds should be taxable, municipal, or both depends on your tax bracket.)

Morningstar.com does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.