Why Bond Fund return of investment is usually better than Fixed Deposit (FD) or saving fund?
We invest in FD and / or saving in bank and bank lends the money to industries or businesses, who pay high interest to bank. Bank acts as middle man who takes a big cut from the high interest cut and pay us little interest in FD / saving. Large corporate who needs large amount of investment fund may find it cheaper to borrow money from Fund Manager Fund manager does not operate like banks with large overheads, office, branches etc. Hence Fund Manager can afford to channel more of the gain to the investors like us, otherwise investors will still keep their money in the bank. Some bonds are attractive to businesses or investors, and there is bond trading also, generating more income to the Fund Manager. As small investors, we benefit from all these, if the fund is well managed.
