Bond fund

A bond fund or debt fund is a fund that invests in bonds, or other debt securities.[1] Bond funds can be contrasted with stock funds and money funds. Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than CDs and money market accounts. Most bond funds pay out dividends more frequently than individual bonds.[2]

Types

Bond Funds can be classified by their primary underlying assets:[2]

  • Government: Government bonds are considered safest, since a government can always "print more money" to pay its debt. In the United States, these are United States Treasury securities or Treasurys. Due to the safety, the yields are typically low.
  • Agency: In the United States, these are bonds issued by government agencies such as the Government National Mortgage Association (Ginnie Mae), Federal Home Loan Mortgage Corp. (Freddie Mac), and Federal National Mortgage Association (Fannie Mae).
  • Municipal: Bonds issued by state and local governments and agencies are subject to certain tax preferences and are typically exempt from federal taxes. In some cases, these bonds are even exempt from state or local taxes.
  • Corporate: Bonds are issued by corporations. All corporate bonds are guaranteed by the borrowing (issuing) company, and the risk depends on the company's ability to pay the loan at maturity. Some bond funds specialize in high-yield securities (junk bonds), which are corporate bonds carrying a higher risk, due to the potential inability of the issuer to repay the bond. Bond funds specializing in junk bonds – also known as "below investment-grade bonds" – pay higher dividends than other bond funds, with the dividend return correlating approximately with the risk.

Bond funds may also be classified by factors such as type of yield (high income) or term (short, medium, long) or some other specialty such as zero-coupon bonds, international bonds, multisector bonds or convertible bonds.[2]

Credit rating

An important property of bond funds is the rating of the bonds they own. Funds may be rated from high to low credit quality. The quality of a fund is the average of the bonds owned by the fund. Funds that pay higher yields typically own lower quality bonds.

Like stocks, the price of high-yield bonds is subject to fashion.[3][4] For example, in late 2008, many high-yield bond funds were priced at 70 cents on the dollar. In fact, there were few bond defaults and the price recovered. Due to the lower price, investors sold out of high-yield bond funds, having a desire for "safe" cash and bonds.[5]

Bond duration

Funds invest in different maturities of bonds. This may be described by terms like "short", "intermediate", and "long". This affects how the fund value changes with interest rates. Funds invested in longer bonds will have more change.[6] As a general rule, the yield for longer bonds is higher.[7]

Bond funds usually have a target length, such as five to ten years. Thus over time, they need to sell shorter bonds and buy longer bonds to stay in range. A bond fund with such a target length will never "mature" like a specific bond. Some UITs own bonds with a specific maturity date and will terminate at that point.

Advantages over individual bonds

  • Management:[8] Fund managers provide dedicated management and save the individual investor from researching issuer creditworthiness, maturity, price, face value, coupon rate, yield, and countless other factors that affect bond investing.
  • Diversification: Bond funds invest in many individual bonds, so that even a relatively small investment is diversified—and when an underperforming bond is just one of many bonds in a fund, its negative impact on an investor's overall portfolio is lessened.
  • Automatic income reinvestment: In a fund, income from all bonds can be reinvested automatically and consistently added to the value of the fund.
  • Liquidity: You can sell shares in a bond fund at any time without regard to bond maturities.

Disadvantages over individual bonds

  • Fees: Bond funds typically charge a fee, often as a percentage of the total investment amount. This fee is not applicable to individually held bonds.
  • Variable Dividends: Bond fund dividend payments may not be fixed as with the interest payments of an individually held bond, leading to potential fluctuation of the value of dividend payments.
  • Variable NAV: The Net Asset Value (NAV) of a bond fund may change over time, unlike an individual bond in which the total issue price will be returned upon maturity (provided the bond issuer does not default).

Total return

Price charts on bond funds typically do not reflect their performance due to the lack of yield consideration. To accurately evaluate a bond fund's performance, both the share price and yield must be considered. The combination of these two indicators is known as the total return.

See also

References

  1. ^ U.S. Securities and Exchange Commission on Bond Funds
  2. ^ a b c CNN Money 101 - Types of Bonds Archived November 23, 2006, at the Wayback Machine
  3. ^ "Junk Bond ETFs Crimped by Outflows - Yahoo Finance". Yahoo! Finance.
  4. ^ "Sour Market Sends Investors to Bond ETFs".
  5. ^ "Bond-fund buyers rewarded for risk in 2009 - MarketWatch". MarketWatch.
  6. ^ Best ETFs For Traders: Short-Term Bonds
  7. ^ "10-Year Bond vs. 20-Year Bond | Finance - Zacks". Zacks Investment Research.
  8. ^ Calvert - Bond Fund Basics
Charles Schwab Corporation

The Charles Schwab Corporation is a bank and stockbroker based in San Francisco, California. It was founded in 1971 by Charles R. Schwab. It is ranked 14th on the list of largest banks in the United States and it is also one of the largest brokerage firms in the United States. The company offers an electronic trading platform to trade financial assets including common stocks, preferred stocks, futures contracts, exchange-traded funds, options, mutual funds, and fixed income investments. It also provides margin lending, and cash management services, as well as services through registered investment advisers.

Schwab operates in four main divisions: investing, wealth management, banking, and trading. As of December 31, 2017, the company had 10.755 million active client brokerage accounts, with $3.362 trillion in assets. The company operates 345 branches in 46 states, as well as branches in both Puerto Rico and London.

Daniel Fuss

Daniel Fuss is the vice chairman of Loomis, Sayles & Company and manager of the $18.5 billion Loomis Sayles Bond Fund. SmartMoney magazine in July 2008 called him one of the world's best investors.He earned his bachelor's and MBA degrees at Marquette University. He is a former U.S. Navy lieutenant. He formerly managed the Yale University endowment.

He manages the Bond Fund with Matthew James Eagan.

Dodge

Dodge is an American brand of automobile manufactured by FCA US LLC (formerly known as Fiat Chrysler Group LLC), based in Auburn Hills, Michigan. Dodge vehicles currently include performance cars, though for much of its existence Dodge was Chrysler's mid-priced brand above Plymouth.

Founded as the Dodge Brothers Company machine shop by brothers Horace Elgin Dodge and John Francis Dodge in the early 1900s, Dodge was originally a supplier of parts and assemblies for Detroit-based automakers and began building complete automobiles under the "Dodge Brothers" brand in 1914, predating the founding of Chrysler Corporation. The factory was located in Hamtramck, Michigan, and was called the Dodge Main factory from 1910 until its closing in January 1980. The Dodge brothers both died in 1920, and the company was sold by their families to Dillon, Read & Co. in 1925 before being sold to Chrysler in 1928. Dodge vehicles mainly consisted of trucks and full-sized passenger cars through the 1970s, though it made memorable compact cars (such as the 1963–76 Dart) and midsize cars (such as the "B-Body" Coronet and Charger from 1962–79).

The 1973 oil crisis and its subsequent impact on the American automobile industry led Chrysler to develop the K platform of compact to midsize cars for the 1981 model year. The K platform and its derivatives are credited with reviving Chrysler's business in the 1980s; one such derivative became the Dodge Caravan.

The Dodge brand has withstood the multiple ownership changes at Chrysler from 1998 to 2009, including its short-lived merger with Daimler-Benz AG from 1998 to 2007, its subsequent sale to Cerberus Capital Management, its 2009 bailout by the United States government, and its subsequent Chapter 11 bankruptcy and acquisition by Fiat.

In 2011, Dodge, Ram, and Dodge's Viper were separated. Dodge said that the Dodge Viper would be an SRT product and Ram will be a manufacturer. In 2014, SRT was merged back into Dodge. Later that year, Chrysler Group was renamed FCA US LLC, corresponding with the merger of Fiat S.p.A. and Chrysler Group into the single corporate structure of Fiat Chrysler Automobiles.

Jeffrey Gundlach

Jeffrey Edward Gundlach (born October 30, 1959) is an American investor and businessperson. He is the founder of DoubleLine Capital LP, an investment firm. He was formerly the head of the $9.3 billion TCW Total Return Bond Fund.

List of United States Supreme Court cases, volume 527

This is a list of all the United States Supreme Court cases from volume 527 of the United States Reports:

Neder v. United States, 527 U.S. 1 (1999)

Chicago v. Morales, 527 U.S. 41 (1999)

Lilly v. Virginia, 527 U.S. 116 (1999)

Dickinson v. Zurko, 527 U.S. 150 (1999)

Greater New Orleans Broadcasting Assn., Inc. v. United States, 527 U.S. 173 (1999)

Cunningham v. Hamilton County, 527 U.S. 198 (1999)

West v. Gibson, 527 U.S. 212 (1999)

NASA v. FLRA, 527 U.S. 229 (1999)

Strickler v. Greene, 527 U.S. 263 (1999)

Grupo Mexicano de Desarrollo, S. A. v. Alliance Bond Fund, Inc., 527 U.S. 308 (1999)

Martin v. Hadix, 527 U.S. 343 (1999)

Jones v. United States, 527 U.S. 373 (1999)

Jefferson County v. Acker, 527 U.S. 423 (1999)

Maryland v. Dyson, 527 U.S. 465 (1999) (per curiam)

Fertel-Rust v. Milwaukee County Mental Health Center, 527 U.S. 469 (1999) (per curiam)

Sutton v. United Air Lines, Inc., 527 U.S. 471 (1999)

Murphy v. United Parcel Service, Inc., 527 U.S. 516 (1999)

Kolstad v. American Dental Assn., 527 U.S. 526 (1999)

Albertson's, Inc. v. Kirkingburg, 527 U.S. 555 (1999)

Olmstead v. L. C., 527 U.S. 581 (1999)

Florida Prepaid Postsecondary Ed. Expense Bd. v. College Savings Bank, 527 U.S. 627 (1999)

College Savings Bank v. Florida Prepaid Postsecondary Ed. Expense Bd., 527 U.S. 666 (1999)

Alden v. Maine, 527 U.S. 706 (1999)

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)

Whitfield v. Texas, 527 U.S. 885 (1999) (per curiam)

Types of bonds by issuer
Types of bonds by payout
Bond valuation
Securitized products
Bond options
Institutions

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