Bond Funds: Money Market Funds, ETFs, Unit Investment Trusts and More
For the average investor, picking your way through the opaque world of individual bond investing can be a daunting task. So why not let the investment pros do the picking for you? Welcome to the world of bond funds -- from money markets, to exchange-traded funds and unit-investment trusts, there's a fund for every need.
Before You Invest in a Bond Mutual Fund
Bonds are among the safest investments available. And as a general rule, mutual funds are the safest way to invest in bonds. But that doesn't mean you should jump right in. Here are a few items to consider before you buy a bond fund.
Bonds are among the safest investments available. And as a general rule, mutual funds are the safest way to invest in bonds. But that doesn't mean you should jump right in. Here are a few items to consider before you buy a bond fund.
Basics of Bond Funds
About.com's guide to mutual funds offers this easy-to-follow introduction to the world of fixed-income funds.
About.com's guide to mutual funds offers this easy-to-follow introduction to the world of fixed-income funds.
Money Market Funds Offer Safety and Liquidity, But You'll Sacrifice Returns
Money market funds are a popular and safe place for investors to keep cash for the short term. These investment vehicles offer both security and liquidity. But the relatively poor returns offered by this class of mutual funds make them ill-suited for long-term investment.
Money market funds are a popular and safe place for investors to keep cash for the short term. These investment vehicles offer both security and liquidity. But the relatively poor returns offered by this class of mutual funds make them ill-suited for long-term investment.
Buying a Municipal Bond Fund
If taxes are a concern, but you don't have at least $100,000 to invest, you should consider buying a municipal bond fund. These mutual funds offer the same tax-free advantages of municipal bonds while also offering diversification.
If taxes are a concern, but you don't have at least $100,000 to invest, you should consider buying a municipal bond fund. These mutual funds offer the same tax-free advantages of municipal bonds while also offering diversification.
Should I Invest in Unit Investment Trusts: Are UITs Right for You?
A "unit investment trust" is made up of a collection of bonds, just like a bond mutual fund. But a UIT holds the investments in the trust until maturity. Fees are low compared with mutual funds. But you'll likely pay a brokerage fee to buy a UIT of up to 3%.
A "unit investment trust" is made up of a collection of bonds, just like a bond mutual fund. But a UIT holds the investments in the trust until maturity. Fees are low compared with mutual funds. But you'll likely pay a brokerage fee to buy a UIT of up to 3%.
Understanding Exchange Traded Funds or ETFs
One of the newer investment vehicles in the bond world is the exchange-traded fund -- a type of mutual fund that is bought and sold like a share of stock. ETFs may have a home in your portfolio. But before you buy, check out About.com's Guide to the world of ETFs.
One of the newer investment vehicles in the bond world is the exchange-traded fund -- a type of mutual fund that is bought and sold like a share of stock. ETFs may have a home in your portfolio. But before you buy, check out About.com's Guide to the world of ETFs.
Comparing Bonds, Bond Funds and Unit Investment Trusts
For the novice investor in the bond world, the most common question for decades has been "should I invest in a bond or a bond fund?" Nowadays you also have to ask, "or should I invest in a unit investment trust. This chart from Bondsonline should help you understand the differences among the three primary debt investment models.
For the novice investor in the bond world, the most common question for decades has been "should I invest in a bond or a bond fund?" Nowadays you also have to ask, "or should I invest in a unit investment trust. This chart from Bondsonline should help you understand the differences among the three primary debt investment models.