Bond Fund Investing: Increasing Your Monthly Payments

Bond fund investing offers a way to participate in the benefits of bonds without having to choose and manage individual bond purchases yourself. There are, of course, risks as with any investment. However, a bond fund has the potential of providing you a monthly payment.

How Bond Funds Work

Bond fund investing is similar on the front end to investing in mutual funds. You are investing a set amount that is combined with amounts from hundred or thousands of other investors. On the back end, instead of owning shares in a fund that owns stocks, you own shares in a fund that owns bonds.

The advantages include the benefit of professionals managing your investments versus you having to do it yourself. Also, your investment is diversified by the fund owning a variety of types of bonds (if that is its objective) which shields you from the risk of having all your investment in the few bonds you could reasonably buy and manage yourself.

The Option of a Monthly Payment

Bond fund investing also offers the option of receiving a regular monthly payment in a varying amount. If you want regular income - although it can vary with market conditions - most bond funds offer it.

You also can choose not to receive the monthly payment and instead reinvest it in the bond fund, increasing your shares in the fund.

Be Aware of rhe Risks

No investment is without risk and this includes bond fund investing. The value of a bond reacts inversely to interest rates. If interest rates go up, the value of the bond goes down. If interest rates go down, the value of a bond goes up.

This not only has long-term implications, but in the short term, if you hope to increase your monthly payment from bond fund investing, swings in interest rates can affect the amount paid out by a bond fund.

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