Investing in Bond Mutual Funds

bond mutual fund all finance updatesToday when we are going through bad economy, everybody are confused over where to put their money. If you want to put in stock market – it can be suicidal. If invest in bank – the return would be very low. Then where to invest the money?

One of the best place is to invest in mutual funds. It is lot safer than shares & returns better than the banks. But at this time of economical depression everyone must be careful before choosing a mutual fund. In case of bonds, regular interest payments and possible capital appreciation (in case bond price increase) are assured. Bond mutual fund assures all. These funds invested in bonds and debt securities. These always provide regular income from interest payments and at the same time protect the invested capital. Like mutual funds, they also have NAV (Net Asset Value) [in mutual fund NAV is value of each share]

Benefits of Bond Mutual Fund

It is much safer than the stock investment.

These ensure stability.

The fund is diversified and the portfolio normally distributed across various bonds to reduce the risk of default. This also assures regular payment.

Some are exempted from federal or state taxes.

Compared to bond these are more liquid. The bond mutual funds can be easily bought or sold. So bond mutual funds are preferable than bonds.

Different Bond Funds

Now several types of bond funds are available in market. Some of them are Government (or Federal bond funds), Municipal, Corporate bonds.

Government Bond Funds or Federal Bond

These are invested in debt securities issued by government (i.e. – Treasury bills and bonds, notes, mortgage backed securities from government agencies etc.).

Municipal Bond Funds

These are invested in issued securities from state or local govt. for different development project. As these are backed by federal govt., these considered to have high credit rating.

Corporate Bond Funds

These are invested in the debt securities of corporations. These have a little bit of risk as are not backed by govt. but pay higher interests than other funds. There are some other Bond Funds too like zero-coupon funds and international funds.


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