Having trouble finding a Investment Grade Bond - Short fund? Thompson Bond Fund (THOPX Quick QuoteTHOPX - Free Report) is a potential starting point. THOPX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

THOPX is classified in the Investment Grade Bond - Short segment by Zacks, an area full of investment potential. By investing in bonds that mature in less than two years, Investment Grade Bond - Short funds are focused on the short end of the curve. Fixed income instruments at this maturity level tend to have low duration risk, but they also pay out small yields compared to their longer-dated peers. Furthermore, these funds' focus on investment grade make them safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Thompson is based in Madison, WI, and is the manager of THOPX. Thompson Bond Fund debuted in February of 1992. Since then, THOPX has accumulated assets of about $1.78 billion, according to the most recently available information. The fund is currently managed by Jason Stephens who has been in charge of the fund since February of 2009.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 5.02%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7.1%, 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. The standard deviation of THOPX over the past three years is 3.4% compared to the category average of 2.75%. Looking at the past 5 years, the fund's standard deviation is 3.23% compared to the category average of 2.51%. This makes the fund more volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For investors who think interest rates will rise, this is an important factor to consider. THOPX has a modified duration of 2.46, which suggests that the fund will decline 2.46% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.62% means that a $10,000 investment should result in a yearly payout of $562.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

With a beta of 0.29, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, THOPX has a positive alpha of 3.07 , 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, THOPX has 68.56% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 14.69%, giving THOPX an average quality of BBB. This means that it focuses on medium quality securities.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, THOPX is a no load fund. It has an expense ratio of 0.73% compared to the category average of 0.58%. Looking at the fund from a cost perspective, THOPX is actually more expensive than its peers.

Investors should also note that the minimum initial investment for the product is $250 and that each subsequent investment needs to be at $50.

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

Bottom Line

Overall, even with its comparatively strong performance, average downside risk, and higher fees, Thompson Bond Fund ( THOPX ) has a high Zacks Mutual Fund rank, and therefore looks a good potential choice for investors right now.

Your research on the Investment Grade Bond - Short segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.