Is DoubleLine Total Return Bond Fund Too Risky?

This fund keeps churning out rich returns in an increasingly problematic bond market. But we should be wary of its risks.

Going against the conventional wisdom is often the key to successful investing. Consider mortgage-backed securities. Investors flocked to them because of their juicy yields until the bonds blew up during the real estate collapse. Since then, most investors have been unwilling to touch these securities. Who, after all, is crazy enough to invest in subprime mortgages?

Enter DoubleLine Total Return (symbol (DBLTX), an aggressive investor in private mortgages -- that is, those not backed by the government. From its inception in April 2010 through July 27, the fund, a member of the Kiplinger 25, has returned an annualized 13.9%, compared with 7.1% for the Barclays U.S. Aggregate Bond index. Over that period DoubleLine ranks in the top 1% among intermediate-term taxable bond funds, according to Morningstar.

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Steven Goldberg
Contributing Columnist, Kiplinger.com
Steve has been writing for Kiplinger's for more than 25 years. As an associate editor and then senior associate editor, he covered mutual funds for Kiplinger's Personal Finance magazine from 1994-2006. He also authored a book, But Which Mutual Funds? In 2006 he joined with Jerry Tweddell, one of his best sources on investing, to form Tweddell Goldberg Investment Management to manage money for individual investors. Steve continues to write a regular column for Kiplinger.com and enjoys hearing investing questions from readers. You can contact Steve at 301.650.6567 or sgoldberg@kiplinger.com.