How to Invest in GNMA Funds

The Government National Mortgage Association, or GNMA, is better known by its nickname, Ginnie Mae. GNMA funds are secure investments that contain mortgage pools of loans extended through the Federal Housing Administration and Department of Veterans Affairs, but they also offer other options in their Ginnie Mae Platinum Securities program. GNMA mortgage-backed investments are the only mortgage-backed securities with a full faith and credit guaranty from the federal government, so you'll get your monthly principal and interest payments on time each month, regardless of individual homeowner mortgage delinquencies that may develop.

Investment Brokers

Many national investment brokers, such as Fidelity, offer GNMA funds. You can buy pieces of Ginnie Mae funds in mutual funds if you're a modest or diverse investor. Although mortgage rates have been at historically low levels, GNMA securities, with their federal government guarantees, remain popular as safe investments. Investment firms typically offer you mutual funds that focus on Ginnie Mae mortgage securities, allowing you the freedom to select your level of investment while enjoying the diversity of a mutual fund.

Online Ratings

Since all GNMA funds are not equal, examine those investment firm offerings for their performance and ratings. Morningstar is often the preferred rating service and offers overall and three-, five- and 10-year performance ratings using one to four stars. This respected rating service rates each Ginnie Mae-focused fund offered by licensed brokers based on risk-adjusted returns. Using state-of-the-art metrics, top rating services also compare the performance of GNMA funds to other safe and secure investments, such as U.S. Treasury options. Examining online ratings is a must before you decide on the investment firm and GNMA fund that is the best fit for your portfolio.

Diversity

While Ginnie Mae funds are popular with investors who rank safety and security at the top of their investment option checklists, you can also achieve diversity in at least two ways. You can open an investment account with a trusted investment brokerage that offers the GNMA mutual funds that interest you. And you can invest in Ginnie Mae Platinum Securities, which combine GNMA mortgage pools with uniform rates and maturity dates into a single Ginnie Mae certificate. GNMA Platinum Securities offer the diversity of a mutual fund with different mortgage pools, while focusing on simplicity, with similar rates and terms to maturity.

Compare Costs

Before you choose the Ginnie Mae fund or investment firm you prefer, compare the fees and costs, as they will lower your yield. For example, GNMA funds offered by some licensed investment brokers are no-load mutual funds. This means no front-end charges are assessed when you buy and no back-end fees are charged when you sell. While these options are often preferable, you may find a GNMA fund that performs well and requires only modest costs to administer, offering you higher returns despite associated fees.

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