Income, Short-Term Funds Get Top Ratings

NEW YORK (TheStreet) -- TheStreet.com Ratings initiated coverage of 16 bond mutual funds that accrued a three-year track record by the end of October. Two received our second-highest rating of "good."

At B-plus, the AARP Income Fund(AANCX Quote) seeks current income and preservation of capital for investors who want to receive a monthly stream of income. Over the past 12 months, the fund has yielded 3.34% as part of rewarding shareholders with a 13% total return.

The fund attempts to mirror the performance of the Barclays U.S. Capital Aggregate Bond Index before expenses. The index charts the combined path of all taxable investment-grade bonds traded in the U.S., including corporate, government, agency, mortgages and other asset-backed securities. Ninety-five percent of the fund is invested in a portfolio of U.S. Treasury notes and agency debt, with just 2.5% in SPDR Barclays Capital High Yield Bond ETF(JNK Quote) and the remainder in a money market portfolio.

The only other newly rated bond fund in the "buy" range, with a rating of B, is the Calvert Ultra-Short Income Fund(CULAX Quote). The fund seeks to preserve capital and generate income from a fixed-income portfolio of floating-rate securities with an average duration of less than one year. The fund has averaged a return of 5.2% over the past three years and 7.5% over 12 months.

Fidelity Advisor Government Income Fund(FVIAX Quote) and BlackRock Short-Term Municipal Fund(MELMX Quote) scored initial ratings at the top end of the "hold" range with grades of C-plus, making them funds to watch in the coming months.

Research Methodology

TheStreet.com Ratings condenses available fund performance and risk data into a single composite opinion of each fund's risk-adjusted performance. This allows for the unbiased identification of funds that have historically done well and those that have underperformed the market. While there is no guarantee of future performance, the investment ratings provide a solid framework for making informed, timely investment decisions.