Nervous investors are making a mad dash to safety. Government bond yields are hitting new lows globally, and risk assets are falling under the pressure of sluggish economic growth and Brexit concerns.

As if fears of economic turmoil aren't bad enough, dividend growth slowed in 2015 and was expected to slow even more this year. What's a risk-averse investor to do?

Let's take a look at three rock-solid bond mutual funds that provide both safety and income in perilous times. They're the right sort of ballast your portfolio needs. We list them in ascending order of risk:

1. Vanguard High-Yield Tax Exempt Fund (VWAHX - Get Report)

In this era of 1% CDs, falling dividend growth and volatile equity markets, municipal bonds are looking better and better.

Also called "munis," municipal bonds are issued by city, county and state governments to raise funds for public projects such as roads, schools, firehouses, hospitals and sewage treatment plants.

Their primary attraction is that the interest paid to the owner of a municipal bond is exempt from federal taxes. A muni investor also is usually exempt from state taxes, if he resides in the same state in which the municipal bonds were issued.

Most state governments have recovered from the Great Recession and have successfully curtailed spending. In particular, they're finally addressing the major threat of skyrocketing pension obligations.

Vanguard High-Yield Tax Exempt Fund seeks a high and sustainable level of current income that is exempt from federal personal income taxes. The fund invests at least 80% of its assets in investment-grade municipal bonds.

This fund boasts a 10-year return of 8.96% and a yield of 3.61%. The expense ratio is 0.20%, compared to 0.80% for the category.

2. Vanguard Intermediate-Term Fund (VFICX - Get Report)

To obtain fairly healthy income while minimizing risk, you should focus on intermediate-term bonds with maturities in the range of five to 10 years. Shorter-term bond yields are skimpy, and longer-term bonds are extremely sensitive to rising rates.

Vanguard Intermediate-Term Fund has diversified exposure to medium and high quality investment-grade bonds with an average maturity of five to 10 years.

The fund invests in corporate bonds, pooled consumer loans and U.S. government bonds. The fund boasts a 10-year return of 5.15% and a yield of 2.95%. The expense ratio is 0.20%, low compared to 0.87% for the category. 

3. The Osterweis Strategic Income Fund (OSTIX - Get Report)

On Wall Street, the term "strategic" is actually a euphemism for "noninvestment grade," so you must tread carefully when choosing a fund of this type. For the fund managers, the crux of operating a successful strategic income fund is staying closely familiar with each of the bond issuers they follow, and knowing which ones will be able to make full interest and principal payments in the future.

The Osterweis Strategic Income Fund is run by a three-member team that is led by Carl Kaufman, who has managed the fund since its inception. The fund consists primarily of high-yield bonds, with holdings that are weighted most heavily in the industrials, consumer staples and consumer discretionary sectors.

The fund boasts a return of 8.54% since inception and a yield of 5.70%. Expense ratio: 0.82%, vs. 1.07% for the category.

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John Persinos is editorial manager and investment analyst at Investing Daily. At the time of publication, the author held no positions in the stocks mentioned.