A Bond Mutual Fund: A Long-Range Investment Decision?

A bond mutual fund will generally be lower risk than another form of fund. Bonds are low-risk investments, particularly if they are highly rated. Mutual funds also specialize in spreading out risk, so combining the two can present a slow, predictable return. You can purchase shares in a bond mutual fund in the short term, but you will likely see the best profits by holding the shares in the long-term.

Short-Term Bonds

Short-term bonds are less risky for the investor, and they also have to compensate for inflation to a much lower degree. Your mutual fund may have some short-term bond options. However, since the bonds are so low risk, the returns will generally be modest.

Long-Term Bonds

Long-term bonds are still very safe investments for the most part. However, due to inflation and other risks, they do have slightly higher interest rates than short-term options on the whole. If your mutual fund has some long-term bonds in the portfolio, you may see a higher return in the end and more coupon payments in the meantime. If you invest in a bond mutual fund, you will gain the biggest advantages by staying in for the long-term.

blog comments powered by Disqus