If you are wanting to figure out how to spot the good bond mutual funds from the bad ones, then here is your dream list. This will tell you what you need to be on the look out for when it comes to high performance bond mutual funds so that you don’t waste your money on foolish, high risk, low return bonds mutuals.

First of all, these bonds should have low expenses. I mean, come on… bonds have a limited return rate as it is, there is no reason to cut even deeper into your gains with high expenses.

Second, remember the index funds rule. If you know how to index stocks, then bonds are really no different. A lot of actively managed bond mutual funds actually don’t beat their relevant index, and that is  a fact to pay attention to!

Make sure that your portfolio is diversified. If this means that of the hundreds or thousands of bonds that you own, most are spread out across many durations and market segments, then so be it. Better that than to have a very narrow minded portfolio with greater risk and less return.

Also, remember to pay attention to the average duration, which is actually the measure of how sensitive your bonds will be to changes in interest rates. Your portfolio will be less volatile if this measure is low, so keep that in mind while you acquire new bonds. Yield to maturity is also something to keep an eye on, as well as the average maturity of all your bonds. Keeping tabs on this will  give you a better overview of your cash flow situation, as well as when the bond will mature.

These are all very important things to remember when buying and trading bonds.