What is a bond fund?

A bond fund, also referred to as a debt fund, invests primarily in bonds (government, corporate, municipal, convertible) and other debt instruments, like mortgage-backed securities (MBS), with the primary goal of generating monthly income for investors. Bond funds provide instant diversification for investors for a low required minimum investment.

What are the different types of bond funds?

The types of bond funds available include: US government bond funds; municipal bond funds; corporate bond funds; mortgage-backed securities (MBS) funds; high-yield bond funds; emerging market bond funds; and global bond funds. Mutual funds have been investing in bonds for many years.

What is a bond and how does it work?

What is a 'Bond'. A bond is a fixed income investment in which an investor loans money to an entity (typically corporate or governmental) which borrows the funds for a defined period of time at a variable or fixed interest rate.

How do bond ETFs work?

Bond ETFs operate much like closed-end funds, in that they are purchased through a brokerage account rather than directly from a fund company. Likewise, when an investor wishes to sell, ETFs must be traded on the open market. A buyer must be found because the fund company will not purchase the shares as they would for open-ended mutual funds.