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Bond fund

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25: 167:), which are corporate bonds carrying a higher risk, due to the potential inability of the issuer to repay the bond. Bond funds specializing in junk bonds – also known as "below investment-grade bonds" – pay higher dividends than other bond funds, with the dividend return correlating approximately with the risk. 187:
Like stocks, the price of high-yield bonds is subject to fashion. For example, in late 2008, many high-yield bond funds were priced at 70 cents on the dollar. In fact, there were few bond defaults and the price recovered. Due to the lower price, investors sold out of high-yield bond funds, having a
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Funds invest in different maturities of bonds. This may be described by terms like "short", "intermediate", and "long". This affects how the fund value changes with interest rates. Funds invested in longer bonds will have more change. As a general rule, the yield for longer bonds is higher.
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Price charts on bond funds typically do not reflect their performance due to the lack of yield consideration. To accurately evaluate a bond fund's performance, both the share price and yield must be considered. The combination of these two indicators is known as the total return.
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Bond funds usually have a target length, such as five to ten years. Thus over time, they need to sell shorter bonds and buy longer bonds to stay in range. A bond fund with such a target length will never "mature" like a specific bond. Some UITs own bonds with a specific maturity
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An important property of bond funds is the rating of the bonds they own. Funds may be rated from high to low credit quality. The quality of a fund is the average of the bonds owned by the fund. Funds that pay higher yields typically own lower quality bonds.
223:: Bond funds invest in many individual bonds, so that even a relatively small investment is diversified—and when an underperforming bond is just one of many bonds in a fund, its negative impact on an investor's overall portfolio is lessened. 163:: Bonds are issued by corporations. All corporate bonds are guaranteed by the borrowing (issuing) company, and the risk depends on the company's ability to pay the loan at maturity. Some bond funds specialize in high-yield securities ( 147:: In the United States, these are bonds issued by government agencies such as the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corp. (Freddie Mac), and Federal National Mortgage Association ( 217:: Fund managers provide dedicated management and save the individual investor from researching issuer creditworthiness, maturity, price, face value, coupon rate, yield, and countless other factors that affect bond investing. 157:: Bonds issued by state and local governments and agencies are subject to certain tax preferences and are typically exempt from federal taxes. In some cases, these bonds are even exempt from state or local taxes. 254:
Bond fund dividend payments may not be fixed as with the interest payments of an individually held bond, leading to potential fluctuation of the value of dividend payments.
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of a bond fund may change over time, unlike an individual bond in which the total issue price will be returned upon maturity (provided the bond issuer does not default).
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that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than
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Bond funds typically charge a fee, often as a percentage of the total investment amount. This fee is not applicable to individually held bonds.
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Bond funds may also be classified by factors such as type of yield (high income) or term (short, medium, long) or some other specialty such as
35: 137:: Government bonds are considered safest, since a government can always "print more money" to pay its debt. In the United States, these are 878: 884: 357: 491: 289: 418: 814: 405: 809: 448: 69: 229:: In a fund, income from all bonds can be reinvested automatically and consistently added to the value of the fund. 391: 138: 373: 804: 680: 91: 620: 660: 917: 484: 912: 819: 51: 430: 753: 655: 115: 799: 763: 600: 559: 922: 477: 119: 8: 569: 645: 99: 852: 778: 630: 552: 304: 354: 235:: You can sell shares in a bond fund at any time without regard to bond maturities. 842: 713: 685: 625: 610: 314: 172: 43: 857: 847: 650: 640: 635: 564: 361: 261: 758: 743: 708: 695: 670: 574: 542: 511: 377: 95: 47: 906: 862: 837: 748: 733: 723: 675: 615: 605: 338: 773: 718: 665: 595: 521: 274: 122:. Most bond funds pay out dividends more frequently than individual bonds. 452: 829: 768: 728: 703: 579: 547: 537: 500: 319: 294: 309: 299: 164: 148: 107: 103: 516: 783: 738: 111: 130:
Bond Funds can be classified by their primary underlying assets:
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or Treasurys. Due to the safety, the yields are typically low.
406:"Bond-fund buyers rewarded for risk in 2009 - MarketWatch" 431:"10-Year Bond vs. 20-Year Bond | Finance - Zacks" 290:
Financial risk management § Investment management
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Securities Industry and Financial Markets Association
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U.S. Securities and Exchange Commission on Bond Funds
374:"Junk Bond ETFs Crimped by Outflows - Yahoo Finance" 208: 16:
Fund that invests in bonds or other debt securities
904: 485: 32:The examples and perspective in this article 879:Commercial Mortgage Securities Association 492: 478: 392:"Sour Market Sends Investors to Bond ETFs" 70:Learn how and when to remove this message 885:International Capital Market Association 419:Best ETFs For Traders: Short-Term Bonds 905: 473: 350: 348: 346: 110:. Bond funds typically pay periodic 102:. Bond funds can be contrasted with 18: 815:Commercial mortgage-backed security 240:Disadvantages over individual bonds 13: 810:Collateralized mortgage obligation 343: 205:and will terminate at that point. 188:desire for "safe" cash and bonds. 14: 934: 139:United States Treasury securities 209:Advantages over individual bonds 191: 178: 23: 499: 268: 805:Collateralized debt obligation 681:Reverse convertible securities 441: 423: 412: 398: 384: 366: 355:CNN Money 101 - Types of Bonds 332: 1: 325: 227:Automatic income reinvestment 449:"Calvert - Bond Fund Basics" 7: 621:Contingent convertible bond 283: 46:, discuss the issue on the 10: 939: 661:Inverse floating rate note 360:November 23, 2006, at the 272: 871: 828: 792: 694: 588: 530: 507: 435:Zacks Investment Research 820:Mortgage-backed security 589:Types of bonds by payout 531:Types of bonds by issuer 125: 754:Option-adjusted spread 656:Inflation-indexed bond 800:Asset-backed security 764:Weighted-average life 601:Auction rate security 262:Net Asset Value (NAV) 120:money market accounts 793:Securitized products 52:create a new article 44:improve this article 34:may not represent a 570:Infrastructure bond 252:Variable Dividends: 646:Floating rate note 900: 899: 853:Exchangeable bond 779:Yield to maturity 631:Exchangeable bond 553:Subordinated debt 305:Stable value fund 173:zero-coupon bonds 80: 79: 72: 54:, as appropriate. 930: 918:Investment funds 843:Convertible bond 686:Zero-coupon bond 626:Convertible bond 611:Commercial paper 494: 487: 480: 471: 470: 464: 463: 461: 460: 451:. Archived from 445: 439: 438: 427: 421: 416: 410: 409: 402: 396: 395: 388: 382: 381: 370: 364: 352: 341: 336: 315:Target date fund 98:, or other debt 94:that invests in 75: 68: 64: 61: 55: 27: 26: 19: 938: 937: 933: 932: 931: 929: 928: 927: 913:Bonds (finance) 903: 902: 901: 896: 867: 858:Extendible bond 848:Embedded option 824: 788: 690: 651:High-yield debt 641:Fixed rate bond 636:Extendible bond 584: 565:Government bond 560:Distressed debt 526: 503: 498: 468: 467: 458: 456: 447: 446: 442: 429: 428: 424: 417: 413: 404: 403: 399: 390: 389: 385: 372: 371: 367: 362:Wayback Machine 353: 344: 337: 333: 328: 286: 277: 271: 242: 221:Diversification 211: 194: 181: 128: 76: 65: 59: 56: 41: 28: 24: 17: 12: 11: 5: 936: 926: 925: 920: 915: 898: 897: 895: 894: 888: 882: 875: 873: 869: 868: 866: 865: 860: 855: 850: 845: 840: 834: 832: 826: 825: 823: 822: 817: 812: 807: 802: 796: 794: 790: 789: 787: 786: 781: 776: 771: 766: 761: 759:Risk-free bond 756: 751: 746: 744:Mortgage yield 741: 736: 731: 726: 721: 716: 711: 706: 700: 698: 696:Bond valuation 692: 691: 689: 688: 683: 678: 673: 671:Perpetual bond 668: 663: 658: 653: 648: 643: 638: 633: 628: 623: 618: 613: 608: 603: 598: 592: 590: 586: 585: 583: 582: 577: 575:Municipal bond 572: 567: 562: 557: 556: 555: 550: 543:Corporate bond 540: 534: 532: 528: 527: 525: 524: 519: 514: 508: 505: 504: 497: 496: 489: 482: 474: 466: 465: 440: 422: 411: 408:. MarketWatch. 397: 383: 378:Yahoo! Finance 365: 342: 330: 329: 327: 324: 323: 322: 317: 312: 307: 302: 297: 292: 285: 282: 273:Main article: 270: 267: 266: 265: 255: 249: 241: 238: 237: 236: 230: 224: 218: 210: 207: 193: 190: 180: 177: 169: 168: 158: 152: 142: 127: 124: 78: 77: 60:September 2010 38:of the subject 36:worldwide view 31: 29: 22: 15: 9: 6: 4: 3: 2: 935: 924: 921: 919: 916: 914: 911: 910: 908: 892: 889: 886: 883: 880: 877: 876: 874: 870: 864: 863:Puttable bond 861: 859: 856: 854: 851: 849: 846: 844: 841: 839: 838:Callable bond 836: 835: 833: 831: 827: 821: 818: 816: 813: 811: 808: 806: 803: 801: 798: 797: 795: 791: 785: 782: 780: 777: 775: 772: 770: 767: 765: 762: 760: 757: 755: 752: 750: 749:Nominal yield 747: 745: 742: 740: 737: 735: 732: 730: 727: 725: 724:Current yield 722: 720: 719:Credit spread 717: 715: 712: 710: 707: 705: 702: 701: 699: 697: 693: 687: 684: 682: 679: 677: 676:Puttable bond 674: 672: 669: 667: 664: 662: 659: 657: 654: 652: 649: 647: 644: 642: 639: 637: 634: 632: 629: 627: 624: 622: 619: 617: 614: 612: 609: 607: 606:Callable bond 604: 602: 599: 597: 594: 593: 591: 587: 581: 578: 576: 573: 571: 568: 566: 563: 561: 558: 554: 551: 549: 546: 545: 544: 541: 539: 536: 535: 533: 529: 523: 520: 518: 515: 513: 510: 509: 506: 502: 495: 490: 488: 483: 481: 476: 475: 472: 455:on 2007-02-03 454: 450: 444: 436: 432: 426: 420: 415: 407: 401: 393: 387: 379: 375: 369: 363: 359: 356: 351: 349: 347: 340: 335: 331: 321: 318: 316: 313: 311: 308: 306: 303: 301: 298: 296: 293: 291: 288: 287: 281: 276: 263: 259: 258:Variable NAV: 256: 253: 250: 247: 244: 243: 234: 231: 228: 225: 222: 219: 216: 213: 212: 206: 204: 198: 192:Bond duration 189: 185: 179:Credit rating 176: 174: 166: 162: 159: 156: 153: 150: 146: 143: 140: 136: 133: 132: 131: 123: 121: 117: 113: 109: 105: 101: 97: 93: 89: 85: 74: 71: 63: 53: 49: 45: 39: 37: 30: 21: 20: 872:Institutions 830:Bond options 774:Yield spread 666:Lottery bond 596:Accrual bond 522:Fixed income 457:. Retrieved 453:the original 443: 425: 414: 400: 386: 368: 334: 278: 275:Total return 269:Total return 257: 251: 245: 232: 226: 220: 214: 202: 199: 195: 186: 182: 170: 160: 154: 144: 134: 129: 87: 83: 81: 66: 57: 33: 923:Bond market 769:Yield curve 729:Dirty price 704:Clean price 580:Global bond 548:Senior debt 538:Agency bond 501:Bond market 320:Yield curve 295:Income fund 108:money funds 104:stock funds 907:Categories 459:2007-02-13 326:References 310:Stock fund 300:Money fund 215:Management 165:junk bonds 149:Fannie Mae 135:Government 100:securities 709:Convexity 517:Debenture 233:Liquidity 161:Corporate 155:Municipal 112:dividends 88:debt fund 84:bond fund 48:talk page 784:Z-spread 739:I-spread 734:Duration 358:Archived 284:See also 42:You may 893:(SIFMA) 887:(ICMA) 881:(CMSA) 714:Coupon 616:Consol 145:Agency 246:Fees: 126:Types 96:bonds 90:is a 50:, or 512:Bond 260:The 203:date 118:and 106:and 92:fund 116:CDs 86:or 909:: 433:. 376:. 345:^ 151:). 82:A 493:e 486:t 479:v 462:. 437:. 394:. 380:. 73:) 67:( 62:) 58:( 40:.

Index

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fund
bonds
securities
stock funds
money funds
dividends
CDs
money market accounts
United States Treasury securities
Fannie Mae
junk bonds
zero-coupon bonds
Net Asset Value (NAV)
Total return
Financial risk management § Investment management
Income fund
Money fund
Stable value fund
Stock fund
Target date fund
Yield curve
U.S. Securities and Exchange Commission on Bond Funds


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