Is DODIX a Strong Bond Fund Right Now?

If investors are looking at the Investment Grade Bond - Intermediate fund category, Dodge & Cox Income I (DODIX) could be a potential option. DODIX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify DODIX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Dodge & Cox is responsible for DODIX, and the company is based out of Kansas City, MO. Since Dodge & Cox Income I made its debut in December of 1988, DODIX has garnered more than $75.59 billion in assets. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. DODIX has a 5-year annualized total return of 1.21%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 4.88%, which places it in the top 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, DODIX's standard deviation comes in at 5.96%, compared to the category average of 8.52%. Looking at the past 5 years, the fund's standard deviation is 6.28% compared to the category average of 9.37%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. DODIX has a modified duration of 6.13, which suggests that the fund will decline 6.13% for every hundred-basis-point increase in interest rates.

With a beta of 0.95, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, DODIX has a positive alpha of 1.37 , 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, DODIX has 68.86% in high quality bonds rated at least "AA" or higher, while 26.75% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of AA, and focuses on high 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, DODIX is a no load fund and it has an expense ratio of 0.41%.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

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

Bottom Line

This puts this fund from Dodge & Cox in the top 20% of all mutual funds we have a rank on right now. As a result, this is likely an excellent choice for investors seeking an option in the Investment Grade Bond - Intermediate category.

For additional information on the Investment Grade Bond - Intermediate 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 DODIX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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

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