WHAT ARE BOND FUNDS?
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Bond funds are mutual funds that invest in bonds and other debt
A debt security is a loan that must be paid
back with interest at the end of a specified period.
Although there are debt securities other than bonds, they make up
only a small part of debt investments.
When investors send money to a bond mutual fund, the fund's
managers use that money to buy bonds and other debt securities.
Bond funds invest primarily to provide investment income and
preserve principal. They are conservative in nature (except for
funds that specialize in high-yield bonds). Many bond fund managers
seek to maintain as little fluctuation as possible in the share
prices of their funds. As a result, bond funds are popular among
investors who are looking for current income, the safety features
of bonds, and the diversification of mutual funds.
Now that you know what a bond fund is, we
will look at some popular types.