In an article for USNews, Tony Dong covered how fixed income funds can help investors reduce volatility in their portfolios while producing a steady income. These funds offer the benefits of bond ownership without the costs and complexity. And, it’s especially the case for fixed income classes where markets are less liquid, opaque, and hard to access such as municipal debt and corporate bonds.

These funds also offer benefits in terms of diversification that simply are not possible to replicate for non-institutional investors. The iShares Core US Aggregate Bond ETF is one of his picks as a top bond fund as it is extremely liquid and has very low costs at 0.03%. The fund holds over 10,000 government and high-quality corporate debt, while it pays a yield of 4.2%. 

Another option is the Nuveen Floating Rate Income Fund which is an actively managed bond fund. This fund offers higher returns as it tends to invest in shorter-term and lower-quality debt. It also has higher costs with an 0.71% annual expense ratio. 

However, active management does offer some benefits especially given recent volatility around rates given increasing levels of financial stress and expectations of a change in Fed policy. 

Finsum: Fixed income funds can help investors reduce volatility in their portfolios while generating a steady income.