Considering Bond Funds

Stocks aren’t all you’ll find when you look at mutual funds.
Bond funds offer professional management and diversification
as well.
I discuss bonds more fully in Chapter 5, but a bond is basically
an IOU from a government entity or corporation. You
lend them the money, and they promise to pay you interest
and principal. The riskier the bond investment, the higher
the rate of interest. You can search for bond funds using the
Quicken.com Web site at www.Quicken.com — click
Investments F Funds F Popular Searches F Bond Funds.
Bond fund managers offer professional expertise in balancing
the risk and return of various types of bonds. There are
three major differences between investing in a bond fund as
opposed to purchasing an individual bond:
n Diversification: Bond funds offer you the advantage of
a calculated mix of bond investments.
n No fixed maturity date: Individual bonds mature on a
specific maturity date; bond funds do not mature. You
decide when to sell your shares in a bond fund.
n Fixed return: When you purchase an individual bond,
you know how much interest and principal is to be paid.
When you buy into a bond fund, you may ultimately sell
your shares at a gain or loss.