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A bond mutual fund is a mutual fund that holds bonds. Every bond mutual fund is offered by prospectus. The prospectus describes the investment objectives of the fund, the risk associated therewith and the asset mix. For example, bond mutual funds may specialize in a particular kind of bond, such as corporate, government, high yield, convertible, mortgage-backed, municipal, foreign, or zero-coupon bonds. Other bond mutual funds will buy some or all of these kinds of bonds. Most bond mutual funds are designed to produce current income for shareholders. Bond funds also produce capital gains when interest rates fall and capital losses when interest rates rise. Unlike the bonds in these funds, the funds themselves never mature.
There are two types of bond mutual funds: open-end and closed end. Open-end funds continually create new shares to accommodate new money as it flows into the funds and they always trade at net asset value. Close-end funds issue a limited number of shares and trade on stock exchanges.
Please keep in mind that this information is being provided for informational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. It the reader has any questions concerning the contents of this post, please consult a qualified professional.Contact Us
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