Bond Fund

Bond fund

A mutual fund that emphasizes income—consistent with risk, rather than growth—by investing in corporate, municipal, or US government debt obligations, or some combination of them.

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bond fund

An investment company that invests in long-term debt securities. A bond fund may restrict its investments to certain categories of bonds, such as corporate, municipal, or foreign bonds, or it may hold many types of bonds. See also corporate bond fund, municipal bond fund.

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Bond Fund

1. A mutual fund that invests exclusively in bonds. It pays dividends based on coupon payments and maturities of the bonds. A bond fund tends to yield more than a money market or certificate of deposit, and pays dividends more often than an individual bond. Bond funds may be composed of convertible, corporate, treasury, mortgage, or municipal bonds, or some combination of the five. They may also be classified by average yield, or by length of time before maturity.

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Bond fund. A bond mutual fund sells shares in the fund to investors and uses the money it raises to invest in a portfolio of bonds to meet its investment objective -- typically to provide regular income.

The appeal of bond funds is that you can usually invest a much smaller amount of money than you would need to buy a portfolio of bonds, making it easier to diversify your fixed-income investments.

Unlike individual bonds, however, bond funds have no maturity date and no guaranteed interest rate because their portfolios aren't fixed. Also unlike individual bonds, they don't promise to return your principal.

You can choose among a variety of bond funds with different investment strategies and levels of risk. Some funds invest in long-term, and others in short-term, bonds. Some buy government bonds, while others buy corporate bonds or municipal bonds. Finally, some buy investment-grade bonds, while others focus on high-yield bonds.