Best Bond Funds to Buy

The best bond funds provide investors with income and stability – and are worthy additions to any well-balanced portfolios.

seven small gold balls balancing on one large gold ball
(Image credit: Getty Images)

When investors begin looking for stability, frequently they turn to the fixed-income market, seeking out the best bond funds and bond ETFs to buy. This is because these debt securities are often much less volatile than stocks. In fact, bankruptcy laws generally state that if a company fails, it is the bondholders that must be made whole first – whereas the failure of a publicly traded company could leave investors with shares that are totally worthless.

Of course, the tradeoff is that it's almost impossible to imagine bonds delivering a quick 10% or 20% in principal gains, while the stock market has had many windows of time where it's been able to pull down those kinds of profits. That stability cuts both ways.

Are bonds good retirement investments?

If you're at or near retirement and your biggest concerns are capital preservation and income, you simply cannot overlook bonds. 

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At a minimum, investors should consider modest exposure to fixed-income markets to add diversification to their holdings – and if your nest egg is large enough, bond funds may even make sense as your core asset as a way to protect your hard-earned money.

Are bonds a good investment this year?

Following a rough 2022 where bonds had one of their worst years on record, Sam Millette, fixed income strategist for Commonwealth Financial Network, says he is seeing " positive signs that bonds are back to acting like bonds in times of uncertainty." He also believes there are "relatively compelling options across most major fixed income sectors," including in investment-grade bonds.

"The economic data continues to paint a relatively positive picture, which should help support company fundamentals for investment-grade corporations," Millette says. However, because corporate bonds are backed by the financial health of their corporate issuers, the strategist adds that investors should be aware of "fundamentals like profitability, debt, and growth potential" that can impact long-term performance when considering allocations.

How to find the best bond funds

To put together our list of the best bond funds, we looked for mutual funds that are well-established with at least $1 billion in assets. Additionally, we homed in on those that are accessible to the majority of investors with minimum investment thresholds of $3,000 or less. 

You always should always do your own research, but these are some of the best bond funds to buy now. These funds span several different strategies to help investors find the right product for their risk tolerance and financial goals.

Data is as of July 7. SEC yields reflect the interest earned after deducting fund expenses for the most recent 30-day period and are a standard measure for bond and preferred-stock funds. 

Vanguard Total Bond Market Index Fund Admiral Shares

Vanguard logo

(Image credit: Courtesy of Vanguard)
  • Assets under management: $93.3 billion
  • SEC yield: 4.4%
  • Expense ratio: 0.05%, or $5 annually for every $10,000 invested

The Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX, $9.43) is the most popular Vanguard mutual fund for bond investors, offering diversified exposure to the fixed-income market in one simple and broad-based fund.

It boasts an enormous portfolio of more than 17,000 "investment-grade" bonds, meaning debt securities of high credit quality from corporations or government entities that are at lower risk of default. 

Right now, about 50% of total assets are in government bonds, with another 25% or so in corporate debt and the rest in "securitized" bonds which include pools of mortgage-related assets. These tend to be medium-term bonds, too, with an average maturity of about 6.5 years across the portfolio.

VBTLX is an index fund, so it's not particularly elegant or tactical. However, it's on this list of best bond funds because it is incredibly well-established and very affordable, with one of the lowest cost structures of any mutual fund on Wall Street.

Learn more about VBTLX at the Vanguard provider site.

Fidelity U.S. Bond Index Fund

Fidelity logo

(Image credit: Courtesy of Fidelity)
  • Assets under management: $59.8 billion
  • SEC yield: 4.4%
  • Expense ratio: 0.025%

Founded back in 1990, the Fidelity U.S. Bond Index Fund (FXNAX, $10.13) offers an even more affordable way for investors to play the bond market. While the prior Vanguard fund is definitely cheap, this index fund is half the fee structure – and boasts an impressive $60 billion of its own to claim its spot as one of the largest bond funds out there.

The mix is slightly different, with only about 45% in government bonds and closer to 30% in securitized bonds. The duration is also slightly shorter at about 6.1 years. 

However, the general strategy is the same in that it invests only in domestic and investment-grade bonds. This means only the highest-quality issuers, including the U.S. Treasury Department, federal mortgage agency Fannie Mae and top financial firms like Citigroup (C).

With no investment minimum, this fund could be a decent alternative to the prior Vanguard fund for those looking to invest just a small amount. Still, the funds are quite similar in many ways, so it may come down to whether your money is parked at one manager or the other.

Learn more about FXNAX at the Fidelity provider site.

PIMCO Total Return Fund 

PIMCO logo

(Image credit: Courtesy of PIMCO)
  • Assets under management: $54.6 billion
  • SEC yield: 4.8%
  • Expense ratio: 0.80%

Another behemoth of the bond investing world is the iconic PIMCO Total Return Fund (PTTAX, $8.37). This actively managed bond fund has been in operation since 1987, and has a long history of outperformance. Since inception, it has averaged more than 6% annual return – a great feat, particularly considering that lifespan crosses an extended period of near-zero interest rates worldwide.

The fund has changed a great deal over the years. Most notably, co-founder and former Chief Investment Officer Bill Gross – dubbed the "Bond King" in the investment world in part because of his stewardship of funds like this one – departed in 2014, which left the fund adrift for a bit. But almost a decade later, and with bonds returning to favor, PTTAX could be worth watching as it hits its stride.

Like the prior funds, Total Return invests mostly in intermediate-term, investment-grade bonds. It has a slightly shorter duration on average of around 5.8 years, but a significantly higher yield because of the tactical decisions taken by the managers that includes a handful of "junk" bonds, emerging market issuances and other assets that rigid index funds will not include. 

One cautionary note: PTTAX isn't the cheapest of bond funds out there, so keep in mind that if this active strategy doesn't pay off, you'll see more of your cash eaten up by fees.

Learn more about PTTAX at the PIMCO provider site.

Dodge & Cox Income Fund

Dodge & Cox logo

(Image credit: Courtesy of Dodge & Cox)
  • Assets under management: $64.4 billion
  • SEC yield: 4.6%
  • Expense ratio: 0.41%

The three giant investment firms mentioned so far are household names. But some folks might be surprised to find the Dodge & Cox Income Fund (DODIX, $12.21) stands toe-to-toe with these behemoths at more than $60 billion in assets under management.

As the name implies, this fund seeks to generate significant and stable income – which is critical in retirement – along with long-term preservation of capital. 

The diversified bond portfolio primarily includes investment-grade debt securities, including U.S. government and municipal bonds along with high quality corporate debt. However, this fund also has the ability to "opportunistically pursue" other areas as the managers see fit, including assets below investment grade or international bonds.

As with PIMCO's Total Return bond fund, this flexibility allows Dodge & Cox Income to tap into slightly higher yield than you'll find in a constrained bond index fund.

Learn more about DODIX at the Dodge & Cox provider site.

PIMCO Income Fund

PIMCO logo

(Image credit: Courtesy of PIMCO)
  • Assets under management: $123.7 billion
  • SEC yield: 4.9%
  • Expense ratio: 0.91%*

The PIMCO Income Fund (PONAX, $10.30) is the most expensive of the bond funds so far, but also the most generous when it comes to yield. This unconstrained fund is not tied to a fixed index, but rather relies on the expertise of its managers to find the bonds that offer the greatest amount of yield without taking on too much risk.

PONAX generally invests in intermediate-term and short-term assets, typically at eight years or less of duration. Additionally, only about 17% of the portfolio is in the top tier of investment-grade debt. In fact, its largest rating category is actually "not rated," with 29% of the fund in these assets, which include emerging market corporate or government debt that isn't covered by ratings agencies.

Obviously this requires much more research from fund managers to make sure these assets are worth investing in. But when you look at PIMCO Income Fund's track record, it seems to deliver. Since its inception in 2007, the fund would have turned $10,000 into more than $26,000 – significantly higher than the roughly $16,000 or so you'd have if you invested in a fund linked to a popular benchmark like the Bloomberg U.S. Aggregate Bond Index.

The global economic landscape is constantly changing, causing different bond sectors to go in and out of favor. The fund's multi-sector approach allows it to seek out the best income-generating ideas in any market climate, targeting multiple sources of income from a global opportunity set.

* Includes 0.01% in interest expenses

Learn more about PONAX at the PIMCO provider site.

Vanguard Total International Bond Index Fund Admiral Shares

Vanguard logo

(Image credit: Courtesy of Vanguard)
  • Assets under management: $49.6 billion
  • SEC yield: 3.3%
  • Expense ratio: 0.11%

The Vanguard Total International Bond Index Fund Admiral Shares (VTABX, $19.32) boasts the smallest yield so far on this list. Still, it stands out as one of the best bond funds to buy if you're looking for diversification and long-term stability.

Specifically, VTABX is an "ex-U.S." fund. This means that it holds assets from everywhere in the world except the domestic marketplace. That makes it a very simple and effective way to add geographic diversification to your investments.

About 55% of total assets are in Europe, with Asia-Pacific next in line at 23% or so. This is fundamentally why the yield is so low, as rates in the eurozone and Japan have been significantly behind those of the U.S. There's also about 7% in emerging market debt, which adds both variety, as well as the potential for a bit more yield.

If you're just after income, this fixed-income fund may not fit. But if you want to reduce your risk profile and add diversification, this Vanguard offering could be worth a closer look.

Learn more about VTABX at the Vanguard provider site. 

Columbia High Yield Bond Fund

Columbia Threadneedle logo

(Image credit: Courtesy of Columbia Threadneedle)
  • Assets under management: $1.3 billion
  • SEC yield: 7.5%
  • Expense ratio: 0.75%

The Columbia High Yield Bond Fund (CYLRX, $10.41) is the smallest name featured here, with "only" about $1 billion in assets under management. But that's in part because it's a highly tactical fund that might not be appropriate for everyone.

That's because less than 3% of total assets are rated BBB or above – meaning the vast majority of this fund's holdings are "junk" bonds from distressed firms. 

That's vastly different than some of the other bond funds on this list that pursue yield by strict analysis of unrated securities and then a tactical bet on the offerings they have faith in. In truth, the Columbia High Yield fund is simply diving in head first, with the intentional goal of chasing less-than-stellar bonds from corporations that include tech giant Uber Technologies (UBER), utility stock NextEra Energy (NEE) and every kind of company in between.

There's admittedly a lot of risk here. But considering the trailing yield is roughly double that of some of the other funds here, those seeking significant income might not mind that risk-reward tradeoff.

Learn more about CYLRX at the Columbia Threadneedle provider site.

Vanguard Short-Term Treasury Fund Investor Shares

  • Assets under management: $6.7 billion
  • SEC yield: 3.3%
  • Expense ratio: 0.20%

The Vanguard Short-Term Treasury Fund Investor Shares (VFISX, $9.75) is the exact opposite of taking on higher risk for higher yield, and is about as rock-solid a bond fund as you will be able to find. That's because it invests in two overlapping categories of assets that have a high degree of certainty – short-term bonds and government bonds.

Short-term bonds tend to have less risk because time equals uncertainty. The longer time horizon you have for an investment, the harder it is to anticipate what the macroeconomic environment will bring or whether "black swan" events will change the very nature of how investors approach their portfolios.

Government bonds are also less risky than corporate debt because of the certainty that comes from the power of taxation. The annual debt ceiling politics sometimes rattle global markets, but the inability of certain intransigent members of Congress to vote to pay our debts is vastly different than the ability of the U.S. to raise necessary funds to pay its obligations through deficit spending or tax hikes.

With an average duration of just 2.2 years and nearly 100% of the portfolio in AAA-rated U.S. Treasury bonds, if this fund falls apart then we probably have bigger problems than accessing our investment accounts.

Learn more about VFISX at the Vanguard provider site.

BlackRock High Yield Municipal Fund Investor Shares

BlackRock logo

(Image credit: Courtesy of BlackRock)
  • Assets under management: $1.7 billion
  • SEC yield: 3.6%
  • Expense ratio: 0.85%*

A kind of "goldilocks" bond fund for investors, the BlackRock High Yield Municipal Fund Investor Shares (MDYHX, $8.65) attempts to achieve attractive, tax-advantaged income by investing at least 80% of its portfolio in municipal bonds.

"Munis" are not quite as rock-solid as Treasuries, but seeing as they are funded by local governments they still carry a lot more certainty than debt issuances from for-profit companies that might not be around in a few years. 

Though almost two-thirds of its bonds are invested in medium- to low-quality municipal borrowers, these include loans to the state of Maryland to fund health and education or Georgia electricity cooperatives. These aren't the kind of organizations that will fail overnight or face high-tech disruption from a competitor.

If you're interested in the added stability of government loans but want a bit more yield, munis could be worth a look. Just remember that like the rest of the names on this list, even the best bond funds should only be purchased as part of a well-rounded portfolio and holistic investing strategy.

* Includes 0.01% in acquired fund fees and expenses

Learn more about MDYHX at the BlackRock provider site.

Jeff Reeves
Contributing Writer,

Jeff Reeves writes about equity markets and exchange-traded funds for Kiplinger. A veteran journalist with extensive capital markets experience, Jeff has written about Wall Street and investing since 2008. His work has appeared in numerous respected finance outlets, including CNBC, the Fox Business Network, the Wall Street Journal digital network, USA Today and CNN Money.