Mutual funds with significant exposure to diversified bonds are excellent choices for investors seeking steady returns with a relatively low level of risk. Investing in funds, which maintain a portfolio of bonds issued across a wide range of market sectors, also reduce sector-specific risk. Moreover, investing in diversified bond funds is preferred to individual bonds' investing as building a portfolio of the second type may prove more expensive than the former. A relatively higher level of liquidity also makes diversified bond funds more attractive.

Below we share with you 4 top-ranked diversified bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the funds to outperform their peers in the future. To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of diversified bond funds .

MassMutual Premier Core Bond R5 (MCBDX – MF report) seeks a high level of total return with capital preservation and is subject to prudent investment risk. MCBDX maintains a diversified portfolio by investing a major portion of its assets in fixed-income producing securities that are rated investment-grade. However, MCBDX can invest a maximum of 10% of its assets in non-investment grade securities. MCBDX is expected to maintain a dollar-weighted average duration similar to that of the Barclays u.s. Aggregate Bond Index. The MassMutual Premier Core Bond R5 fund has a three-year annualized return of 1.9%.

As of June 2015, MCBDX held 902 issues, with 16.28% of its assets invested in U.S. 5yr Note (Cbt) Sep15 Xcbt 20150930.

Baird Core Plus Bond Investor (BCOSX – MF report) invests a large chunk of its assets in debt securities including bonds that are denominated in the U.S. dollar, securities issued by the U.S. government or its affiliates, asset and mortgage backed securities, and corporate bonds issued by both domestic and foreign corporate bodies. Though BCOSX mainly focuses on acquiring investment-grade debt securities, it may also invest not more than 20% of its assets in securities that are rated below investment grade and known as “junk” bonds. BCOSX is expected to provide a higher annual rate of total return than the Barclays U.S. Universal Bond Index. The Baird Core Plus Bond Investor fund has a three-year annualized return of 2.2%.