Investor's wiki

Bond Fund

Bond Fund

What is a bond fund?

A bond fund is a fund comprised of bonds and other debt instruments. Like mutual funds, bond funds vary in the type of bonds they center around. Bond funds can be comprised of government bonds, corporate bonds, mortgage back securities, and convertible bonds, to give some examples.

More profound definition

Bond funds are frequently used to give investors month to month income. The amount of the regularly scheduled payments might differ from one month to another since the fund is comprised of various bonds.
While bonds mature on a specific date, bond funds are planned so the bonds mature on a staggered basis to guarantee income payments are reliably delivered. As the bonds mature, the fund manager replaces them with different bonds.
While some bond funds are intended to mirror the more extensive market, other bond funds represent considerable authority in specific types of bonds. For instance, a bond fund might comprise of essentially short-term bonds, bonds from emerging markets or high-yield bonds.

Bond fund model

George and Ann have decided to invest $100,000 in a bond fund. The bond fund is comprised of municipal bonds. These bonds are issued by state and nearby governments that utilization the money to fund schools, infrastructure and different undertakings.
While municipal bond funds offer lower-than-normal yields, the income they produce isn't subject to federal taxes. Since two or three has decided to invest in a bond fund versus bonds, George and Ann receive month to month income from the fund. Since the bond is comprised of different municipal bonds, their month to month income shifts.


  • A bond fund invests essentially in a portfolio of fixed-income securities.
  • Bond funds give instant diversification to investors for a low required least investment.
  • Due to the inverse relationship between interest rates and bond prices, a long-term bond has greater interest rate risk than a short-term bond.