What Are the Best Intermediate-Term Treasury Bond Funds?
U.S. government bonds can be bought on TreasuryDirect without paying a markup. Nonetheless, Treasury bond funds offer instant diversification of maturities at modest cost. Remember that while conventional Treasury bonds are said to carry very little risk of default, they do carry other risks, such as interest-rate risk. And in these days of modest yield, you also run the risk that you may not be able to stay ahead of inflation.
Fidelity Government Income (FGOVX)
Contact: 800-544-6666; Fidelity
Type of fund: Actively managed mutual fund
Types of bonds: Intermediate government
Average maturity: 6.3 years
Expense ratio: 0.45 percent
Minimum investment: $2,500
This mutual fund, run by one of the largest U.S. asset managers, features an array of government bonds. The fund may use leveraging (borrowing) to juice the yield, which creates a tad bit of risk, but the management team seems careful not to go overboard.
iShares Barclays 7–10 Year Treasury Bond Fund (IEF)
Contact: 800-474-2737; iShares
Type of fund: Exchange-traded fund
Types of bonds: Intermediate-term Treasury
Average maturity: 8.5 years
Expense ratio: 0.15 percent
Minimum investment: None
As with all ETFs, you generally pay a commission to buy and sell this fund.