How do I make or lose money on bond funds?
You get paid interest income from the bonds held by the fund. You can take this income in the form of more units of the fund or cash distributions. The more units of the fund you hold, the more income you get. If the bond fund’s price drops and you sell your units, you will lose money. If the bond fund’s price goes up and you sell, you will make money. What does it cost to invest in bond funds? There are fees and commissions to pay when you buy bond funds, just as there are for other mutual funds. When you buy an individual bond, in most cases the brokerage firm selling the bond will simply mark up its price to recover its costs. You don’t pay separate fees. Tip: Always review a bond fund’s prospectus before investing. The prospectus is a document that tells you the main facts about a fund, including all the fees and expenses you may pay. Are bond funds a good choice for me? This chart compares two ways to buy bonds: individually and bond funds.
