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.
A municipal bond mutual fund
is similar to a unit trust except that its underlying portfolio is "managed" (i.e., there is a regular sale and purchase of bonds to take advantage of changing market conditions).
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.
A fixed annuity can provide clients with a similar rate of return to a bond mutual fund
, with greater safety.
Jack Roberts purchases shares in a bond mutual fund
when interest rates are at record lows.