Advantages for Every Bond Fund Investor
What type of investor are you? Depending on your level of investment experience, tax situation, and financial goals, bond mutual funds can help you in various ways.
If you're new to investing, you may choose to invest in one or more bond funds as part of a broader portfolio. Depending on your investment goals and time horizon, bond funds may play a larger or smaller role in your strategy. Professionally managed funds can be a great way to diversify without requiring expert investment knowledge.
If you have shorter-term investment goals, short-term funds can be an attractive investment vehicle offering greater return potential than money market funds and less volatility than stock funds. Of course, even the best bond funds are subject to greater price fluctuation than money market funds.
If you tend to have a higher tolerance for risk, bond funds may play a smaller role in your investment strategy. However, high-quality top bond funds can help reduce the volatility of an aggressive, stock-heavy portfolio, while high yield or emerging markets bond funds may offer another means to seek higher returns.
If you're an investor in a higher tax bracket, municipal bond funds offer tax-free income opportunities.* Consider them if your income puts you in a high tax bracket or you live in a high-tax state.
*Some income may be subject to the federal alternative minimum tax (AMT).
If you're focused on retirement, bond mutual funds can provide an attractive balance of risk and potential return for those who desire current income but who are seeking higher returns than money market investments.
Investments in money market funds are not insured or guaranteed by the FDIC or any other government agency. Although the funds seek to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in them.