Morningstar Analyst Rating
|Intermediate Core Bond|
|Intermediate Core Bond|
Morningstar suggests that investors select intermediate-term bond funds for the core of their fixed-income allocations. By dedicating a sizable chunk of a portfolio’s fixed-income allocation in such funds, you will be better positioned to withstand bond-market shocks from interest-rate increases or credit-quality scares. Plus, you’ll get the diversification benefits that bonds can offer an equity-heavy portfolio. Investors who want funds that own only the highest-quality intermediate-term credits can focus their efforts on funds in the intermediate-government Morningstar Category. Those willing to include corporate bonds and other fare in addition to governments can survey the intermediate-term bond category.
Intermediate-Term Bond Funds
Investors seeking diversification benefits for an equity-heavy portfolio can be well served by higher-quality, intermediate-term core bond funds, which blend government bonds, mortgage-backed securities, and high-quality corporate debt and have an average duration of greater than or equal to 3.5 years but less than or equal to six years.
The Analyst Rating for Funds is based on our fund analysts’ conviction in a fund’s ability to outperform its peer group (funds in the same category) and benchmark on a risk-adjusted basis over the long term. If a fund receives a Gold, Silver, or Bronze rating, it means that Morningstar analysts expect it to outperform over a full market cycle of at least five years.
This list includes only no-load funds. “No load” refers to a mutual fund that does not charge a fee (known as a load) for buying or selling its shares; the investor typically buys no-load funds directly from a fund company or through a fund supermarket. Load funds, on the other hand, are sold by an advisor or broker and charge a percentage fee at purchase or sale of the shares, which is meant to be compensation for the planner’s investment-selection advice. (Note: Not all advisors sell load funds. Many are compensated via a flat fee or a percentage of all assets under management.) Whether a fund charges a load or not isn’t a reflection of its underlying quality. Many load funds are also Medalists, and some load funds are available without a load through 401(k) or other retirement plans. But we’re including only no-load funds here, since this list is designed to help investors who are primarily doing their own fund-picking.
Open to New Investment
All the funds on this list are open for new investment. Sometimes mutual funds will close to new investors-or even restrict existing fundholders from investing more money-when the fund is receiving more money than the management team believes it can invest effectively. Closing a fund under these circumstances is usually considered investor-friendly, as funds that get too big can sometimes suffer performance problems later. Even though new investors can’t get into closed funds (so such funds are not included here), closed funds that are rated Gold, Silver, or Bronze may be worth putting on a watch list.
Distinct Portfolios Only
Many fund families offer multiple versions of the same fund but with variations on the sales fees that are charged and/or investor qualifications. Screening for “distinct portfolios only” removes all but one of these options to avoid having several share classes of the same offering cluttering the list. Morningstar normally designates the oldest share class as the distinct portfolio. In some cases, this share class may be for institutions (such as company retirement funds) or otherwise have a high investment minimum. In those cases, investors may want to consider an “investor” share class of the same fund, though the fund expenses may be higher for those share classes.