What is a Bond?

• A bond is basically an I Owe You (IOU). An investor purchases a bond from a bond issuer, and the issuer in return agrees to pay the investor interest on the amount of the bond, for the life of the bond, and also to pay the face value of the bond when it comes due.
  
  

Bond Funds

• Bond funds invest primarily in bonds or other types of debt securities. They are sensitive to fluctuations in market conditions and interest rates. If interest rates drop, the fund's share price tends to rise, and if interest rises, the share price usually declines.
  
  

Investment Strategy

• Usually investors choose to buy bonds funds to diversify their portfolio, and to generate a regular stream of income.
  
  

Types of bond funds

• Funds include government bonds, municipal bonds, corporate bonds, convertible bonds, zero-coupon bonds and international bond funds. Governments, cities and corporations use the money borrowed to fund projects.
  
  

Risks

• Credit risks and interest rate come with investing in bond funds.