Best Performing Bond Funds
Best Performing Bond Funds
What are bond funds?
One of the collective investment techniques used to invest a group of funds into either bonds or other debt securities for the purposes of financial gain involves the use of what are called “bond funds.” These typically pay dividends periodically including interest income earned on the security of the funds as well as capital appreciation realized on a periodic basis. Additionally, bond funds normally pay dividends out more frequently than what bonds do and those dividends are typically higher than those realized by either CD’s or money market accounts.
4 primary types of bond funds to consider
Bond funds are usually categorized by the primary underlying assets of those funds. The following are the 4 primary types of bond funds to consider investing in:
- Corporate – bonds which are issued by corporations and are guaranteed by the borrowing (i.e. issuing) company or corporation, the risk of which depends on the ability of that entity to pay back the loan once it reaches maturity
- Government Treasury – these usually involve what are called “treasury securities” and are the safest type of bond fund investment due to its non-existent risk factor
- Mortgage – these are government agency issued mortgage loans such as Fannie Mae’s or Freddie Mac’s
- Municipal – local and state government (and other agency) issued bond funds which are subject to a variety of tax implications and preferences but are usually exempt from federal (and sometimes state) taxation
The best types of bond funds to invest in
There are several types of bond funds that an individual can invest in. As with choosing a good stock, it can oftentimes be challenging to select the best bond funds. The following is a list of our recommendations for the best performing bond funds:
- funds which are protected from inflation – these hold debt securities and are government issued as well as adjusting the interest and principal based on changes in the current inflation rates
- intermediate-term bond funds – these also hold debt securities and typically mature within 5 to 10 years on the average as well as featuring higher returns and lower risk factors
- short-term bond funds – these average a 5 year maturity period and feature less risk where the effects of inflation and varying interest rates are concerned
So as you can see, educating yourself about bond funds and researching them thoroughly are critical where investing in bond funds is concerned.
Best Performing Bond Funds
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