Types of Bond Mutual Funds

A bond mutual fund is an investment scheme that invests in bonds and other debt securities with the purpose of providing income through dividends or as a balance to a portfolio.

Following are the different types of bond mutual funds to choose from, depending on your risk tolerance:

1) Corporate Bond Funds: These are made up of a selection of bond issued by different corporations. Most corporate bond funds invest in bonds with good credit quality (rated AAA to A3), and provide investors with higher returns on their investments.

2) Municipal Bond Funds: These funds invest in debt securities issued by state and local governments for the purpose of funding public projects. Generally, the income generated in these funds is tax-free at the federal level. This is a great choice for investors who have a large tax burden.

3) Government Bond Funds: These funds invest in debt securities that are issued by the United States government and its agencies, such as treasury bonds, treasury bills, treasury notes, etc. However, they are not insured or guaranteed by any government agency.

4) High-Yield Bond Funds: This type of funds invests in fixed-income securities that are non-investment-grade and has a higher degree of risk.

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