Mutual funds investing in debt securities are among the most secure options for earning regular income while protecting the capital invested. Funds that are part of this category bring a great deal of stability to one’s portfolio with a large proportion of equity, while providing dividends more frequently than individual bonds.
U.S. government bond funds usually invest in Treasury bills, notes and securities issued by government agencies. They are considered the safest in the bond fund category and are ideal for risk-averse investors.
Meanwhile, a short-term government bond fund is a mutual fund that is limited by its investment objectives and fund bylaws to invest primarily in the short-term obligations of the federal government or its agencies. Depending on the fund’s definition, the short term can be up to five years.
Below, we share with you three short-term government bond mutual funds, viz. Cm Advisors Fixed Income Fund CMFIX, GMO U.S. Treasury Fund GUSTX and Loomis Sayles Funds – Ltd Term Govt and Agency NEFLX. Each has earned a Zacks Mutual Fund #1 Rank (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
Cm Advisors Fixed Income Fund invests most of its assets, along with borrowings, if any, in dollar-denominated fixed-income securities and shares of other RICs that invest primarily in fixed-income securities. CMFIX advisors also invest in corporate bonds, U.S. government securities and mortgage-backed securities that are undervalued.
Cm Advisors Fixed Income Fund has three-year annualized returns of 8.5%. As of the end of August 2025, CMFIX has invested 11.9% of its net assets in Miscellaneous bonds.
GMO U.S. Treasury Fund invests most of its net assets in Direct U.S. Treasury Obligations and collateralized repurchase agreements that include U.S. Treasury bills, bonds and notes and other securities issued by the U.S. Treasury, as well as Separately Traded Registered Interest and Principal Securities and other zero-coupon securities. GUSTX advisors seek to maintain an estimated interest rate duration of one year or less.
GMO U.S. Treasury Fund has three-year annualized returns of 5.1%. GUSTX has an expense ratio of 0.09%.
Loomis Sayles Funds – Ltd Term Govt and Agency fund invests most of its net assets inissues with credit quality above or below the credit rating of the U.S. government’s long-term debt instruments by the U.S. government itself, its agencies or instrumentalities. NEFLX advisors may also choose investment-grade corporate notes and bonds, collateralized loan obligations, zero-coupon bonds, asset-backed securities and mortgage-related securities.