These Core Bond Funds Earn Top Marks

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.)