The average
bond mutual fund manages about $790 million in assets, which is significantly smaller in size than the average equity fund ($1.7 billion).
If you own a
bond mutual fund or have a 401(k) account, there's a good chance that you have some foreign-bond investments, even if you don't know it.
That risk can be reduced by investing in individual bonds with a fixed maturity date rather than investing in a
bond mutual fund. Bond funds don't have fixed maturity dates, so investor losses can be permanent when interest rates rise.
Portfolio turnover for a typical
bond mutual fund is close to 100 percent annually.
Table 3 Summary Statistics for Stock and
Bond Mutual Fund Flows Number of Mean Flows Fund Group Observations (Percent) Stock funds Growth 118 1.0 Global equity 118 1.4 Income 118 1.1 Bond funds 0.4 Government 118 1.4 Corporate 118 0.4 GNMA 118 1.1 High yield 118 1.1 Municipal 118 Standard Deviation First Order Fund Group (Percent) Autocorrelations Stock funds Growth 1.3 0.34 Global equity 2.2 0.70 Income 0.9 0.69 Bond funds Government 1.8 0.90 Corporate 1.7 0.75 GNMA 2.2 0.84 High yield 2.0 0.36 Municipal 1.5 0.67
(4) let the fund managers of a
bond mutual fund take care of the investment strategies.
* If you are considering a
bond mutual fund, ask these questions: What is the credit quality or the average rating of the bonds in the portfolio?
You can get instant diversification by investing in a
bond mutual fund or unit trust.
Jack Roberts purchases shares in a
bond mutual fund when interest rates are at record lows.