What Is A Corporate Bond Fund?

A corporate bond fund is a collective investment in several types of bonds. Bond funds typically pay dividends that include interest payments similar to a corporate bond as well as periodic realized capital appreciation. Most bond funds pay out dividends more frequently than individual bonds. Bond funds are usually made up of one or more of the following types of bond assets:

· Government/Treasury

· Mortgage

· Corporate

· Municipal

Bond funds can be classified by factors such as type of yield, term, multi-sector or convertible bonds.

Advantages of a Corporate Bond Fund

There are several advantages that bond funds offer over regular corporate bonds:

Management

The management of a bond fund includes the years of analysis and dedicated management provided by an investment company. This takes the management issue away from the investor and saves them from research and analysis on several factors including company strength, maturity, price, face value, coupon rate and yield.

Diversification

Bond funds invest in many individual bonds, meaning a bond fund is made up of several diverse types of bonds, so if one bond is not performing highly, then the impact is not as severe as a single corporate or other form of bond.

Liquidity

Bond funds can be sold at any time and are not subject to maturity like other forms of bonds.