If you’re looking for a way to earn a stable income without taking wild market risks, short-term government bond mutual funds might be worth your attention. They’re not flashy, but right now, they’re doing exactly what they’re meant to do that is, provide regular income while keeping your money safe.

Here’s what’s happening in this corner of the investment world and why it matters to everyday investors like us.

The No-Hate Club Funds

In a market filled with constant noise around tech stocks and hedge fund drama, short-term government bond funds are quietly offering something investors crave, and that’s stability.

These mutual funds invest in short-term U.S. government securities, such as Treasury bills, bonds, and notes. The goal here is to earn a steady return with as little risk as possible.

These funds are especially attractive for risk-averse investors or anyone who just wants a safer spot to park their cash while still earning some income. Unlike regular bonds, mutual funds in this category pay out dividends more often and tend to weather market volatility better.

Another plus point is that many of these funds are outperforming their peers and getting noticed by analysts.

Top 3 Funds to Play Smart (& Safe)

Let’s talk about three funds that are doing well right now. They’ve all been ranked #1 (Strong Buy) by Zacks Mutual Fund Rankings, and their strategies are pretty straightforward.

1. GMO US Treasury Fund (GUSTX)

This fund puts most of its money into U.S. Treasury securities and collateralized repurchase agreements. It focuses on high-quality, short-term government-backed debt. Over the past three years, it’s delivered a 4.8% return.

As of early 2025, nearly a quarter of its assets were held in cash, giving it flexibility to react to market changes.

2. Federated Hermes Short-Term Govt IS (FSGVX)

This one invests mostly in Treasury and government agency securities with maturities between one and three years. It’s been managed by Todd A. Abraham since 2017 and has posted a 3.1% return over the past three years. Its focus on short maturity gives it some cushion against rising interest rates.

3. SEI Short-Duration Government Fund (TCSGX)

TCSGX leans into Treasury obligations and mortgage-backed securities. The fund is also backed by government guarantees, which help keep the risk low. It has returned 3.5% over the last three years and comes with an expense ratio of 0.48%.

To Wrap-Up

Short-term government bond funds aren’t usually the stars of the show, but right now, they’re delivering reliable performance in a time when reliability is hard to come by. If you’re not looking for sky-high returns but want to protect your capital and earn a little along the way, these funds are worth considering.

Whether you’re new to investing or just want a smart place to park some cash, these picks bring a strong mix of safety and returns.