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3 Core Bond Funds to Take the Sting Out of a Bear Market

It's worth the time to do your research on bond funds.

Russel Kinnel: It’s worth the time to do your research on bond funds.

Almost everyone needs a core bond fund. If you are a younger investor, it’s a handy diversifier that will take some of the sting out of bear markets. If you are retired, a core bond fund is a vital source of income that only takes on modest risk to get that yield.

I’ll share three great options for you to consider.

3 Great Core Bond Funds

These funds earned a Morningstar Analyst Rating of Gold.

  1. Baird Aggregate Bond (BAGIX)
  2. Dodge & Cox Income (DODIX)
  3. Vanguard Tax-Exempt Bond (VTEAX)

Baird Aggregate Bond (BAGIX) is a Gold-rated fund led by Mary Ellen Stanek. Stanek and her team do a great job of taking a number of small bets that enable the fund to outperform without taking on much risk. The fund’s been a very consistent performer thanks to manager skill and low fees. 

Dodge & Cox Income (DODIX) is a Gold-rated fund in our core-plus category. Core-plus funds tend to take on more risk in credit, sectors, and duration. In this case, the risk comes on the credit side. The fund leverages equity research to find good investment-grade corporate bonds, and it generally gets rewarded for taking on those risks.

If you are investing in a taxable account, you should consider a municipal-bond fund so that your income is tax-free. Vanguard Tax-Exempt Bond (VTEAX) tracks a broad index with an emphasis on liquidity. It charges just 9 basis points, so that nearly all the portfolio income goes straight to investors. We rate the fund Gold.

Watch 3 Low-Volatility Funds in the Zone from Russel Kinnel.