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How to Spot a Bad Bond Fund

It's not that hard if you know where to look.


A version of this article appeared on on Nov. 13, 2013.

OK, so "bad" might be a little strong. It's difficult to point to any one or two factors and credibly argue that they alone make a bond fund bad. However, there are red flags that investors can watch for to help ferret out those bond funds that are likely taking on more risk of a blowup than others. The presence of one of these factors might be rightly interpreted as a reason to sit up and pay closer attention. If a bond fund flies multiple red flags, though, chances are that it's best left alone.

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