What Is a Bond Mutual Fund?
A bond mutual fund is an investment company created solely to manage a pool of investments—also called a portfolio—consisting primarily of individual bonds. (To a limited extent, bond mutual funds may also invest in other types of securities.) Investors purchase shares in the fund. Each share represents a proportional ownership interest in the pool of bonds comprising the fund’s portfolio. Professional money managers use the money invested by shareholders to buy and sell bonds for the portfolio in accordance with the fund’s investment objective. Because of the pooling of resources, bond mutual fund shareholders can invest in a greater variety of bonds than the average investor could individually. In addition, many bond mutual funds have minimum investments that are significantly less than the principal value of many individual bonds. For instance, a single Government National Mortgage Association (GNMA or Ginnie Mae) bond costs $25,000, but you can invest in most GNMA bond mutual funds
