Ginnie Mae mutual fund

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Ginnie Mae Mutual Fund

A mutual fund that invests exclusively in mortgage-backed securities issued by Ginnie Mae. The returns on Ginnie Mae mutual funds vary according to the interest rates currently being paid on the mortgages underlying the MBSs. Ginnie Mae mutual funds are relatively low-risk, as Ginnie Mae mortgages are guaranteed or insured by various branches of the U.S. government. Additionally, each mutual fund contains many Ginnie Mae mortgages, reducing the investor's exposure to prepayment risk. Some buy shares in Ginnie Mae mutual funds simply because they are available in smaller denominations than the individual MBSs underlying them.

Ginnie Mae mutual fund

A mutual fund that invests exclusively in Ginnie Mae certificates and passes through the interest payments to owners of the fund's shares. Because the fund continually invests in new certificates, the yield on the fund varies over time. In addition, the value of a fund will change as long-term interest rates change. The primary advantage of buying a fund over buying Ginnie Mae certificates directly is that the fund is sold to investors in smaller denominations. Furthermore, a fund's investments are spread over a large number of certificates so that prepayment of principal is not as much of a problem. The main disadvantage of a fund is that it may entail a sales fee of from 4 to 6% of the amount invested and will charge an annual investment fee.
References in periodicals archive ?
The bond funds that are now open are: Spartan(R) Government Income Fund, Fidelity Ginnie Mae Fund, Fidelity Government Income Fund, Fidelity Intermediate Government Income Fund, Fidelity Advisor Government Investment Fund (all share classes) and Fidelity Institutional Short-Intermediate Government Fund.
Effective March 1, 1997, the expense caps on Spartan Ginnie Mae Fund, Spartan Investment Grade Bond Fund, Spartan Limited Maturity Government Fund and Spartan Short-Term Bond Fund were lowered from 65 basis points to 38 basis points.
Ginnie Mae funds could expand their role in the mortgage market, according to Youngblood.
Grzymala suggests that investors who have 30% of their portfolio invested in fixed-income funds might want to invest 5% to 8% of their overall portfolio in Ginnie Mae funds.
Some 8 percent Ginnie Mae funds are actually paying effective yields as low as 5.
Ballantine notes that Ginnie Mae funds can be as liquid as money market accounts, and that many, including the Payden GNMA Fund, have check writing privileges.