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These Funds Deliver Income, but Mind the Downside

Recent market tumult illustrates the risks of several noncore bond-fund types.

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Investors in U.S. and foreign stocks had a difficult third quarter, with stocks posting their worst losses in four years. 

Bonds generally held their ground, and a handful of categories even rallied. As the yield on 10-year Treasuries dropped from 2.4% in early July to less than 2% by the end of September, long-term government-bond funds gained 5.4% during the quarter. The Barclays U.S. Aggregate Bond Index picked up 1.2% during the period. 

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Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.