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There are plenty of choices in the Diversified Bonds category, but where should you start your research? Well, one fund that you should consider investigating is Putnam Diversified Income A (PDINX). PDINX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

PDINX is one of many Diversified Bonds funds to choose from. Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.

History of Fund/Manager

Putnam Funds is based in Canton, MA, and is the manager of PDINX. Putnam Diversified Income A debuted in October of 1988. Since then, PDINX has accumulated assets of about $489.20 million, according to the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 3.16%, and is in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3 -year annualized total return of 3.89%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, PDINX's standard deviation comes in at 5.37%, compared to the category average of 12.54%. Looking at the past 5 years, the fund's standard deviation is 5.18% compared to the category average of 13.59%. This makes the fund less volatile than its peers over the past half-decade.

With a beta of 0.52, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PDINX has a positive alpha of 2.44, which measures performance on a risk-adjusted basis.

Ratings

Investors should also consider a bond's rating, which is a grade ( 'AAA' to 'D' ) given to a bond that indicates its credit quality. With this letter scale in mind, PDINX 's junk bond component-bonds rated 'BB' or below-is at 28.92%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, PDINX is a load fund. It has an expense ratio of 1.03% compared to the category average of 1%. PDINX is actually more expensive than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $500 and that each subsequent investment has no minimum amount.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively weak performance, better downside risk, and higher fees, Putnam Diversified Income A ( PDINX ) has a neutral Zacks Mutual Fund rank, and therefore looks a somewhat average choice for investors right now.

For additional information on the Diversified Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PDINX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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This article originally published on Zacks Investment Research (zacks.com).

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