Bonds: Bond Mutual Funds

Bond funds offer investors an easy way to tap into the bond market without having to tap too deeply into their savings.

Bonds are debt that governments and corporations take on. People who buy the bonds essentially lend them the money, which they get back in return plus interest, providing what is generally a fixed-income return. But bonds can be expensive for investors, with the minimum investment often $5,000 or more. The benefit of bond funds is that the minimums for investing are typically lower, and since they invest in a number of offerings, investors get greater diversification.

Bond funds differ from bonds in other ways as well. Unlike individual bonds, bond funds don't have a fixed maturity date, nor do they have a guaranteed interest rate. Also, unlike bonds, bond funds don't guarantee to return your initial investment. ...