As the price
of bonds in a fund adjusts to a rise in interest rates, the fund's share price may decline.
As the prices of the
municipal bonds in a fund portfolio adjust to a rise in interest rates, the fund's share price may decline.
Mutual funds may hold bonds to maturity, but the
newer bonds in the fund will still bear the risk, so you could lose money when you eventually do sell your bond fund.
Although
bonds in the fund mature eventually, the proceeds are reinvested in new bonds rather than returned to investors.
-LSB-...] Via Greenbackd Michael Burry is a value investor notable for being one of the first, if not the first, to short sub-prime
mortgage bonds in his fund, Scion Capital.
Key credit spreads were widening, such as those between intermediate - term treasury bonds and riskier corporate
bonds in funds like iShares Baa - Ba Rated Corporate Bond ETF (BATS: QLTB) or SPDR High Yield Bond (JNK).
This can occur on a broad scale where a fund manager might alter the ratio of stocks to
bonds in his fund -LSB-...]
On the other hand, just as I reccomended throughout 2014, I believe it makes sense to remain committed to longer -
term bonds in funds like iShares 10 - 20 Year Treasury (TLH) as well as lower volatility stocks across the sector spectrum.
-LSB-...] bonds in his fund, Scion Capital.
The value
of bonds in the fund's portfolio may fall or fail to rise over extended periods of time for a variety of reasons including general financial market conditions, changing market perceptions of the risk of default, changes in government intervention, and factors related to a specific issuer or industry.
Michael Burry is a value investor notable for being one of the first, if not the first, to short sub-prime
mortgage bonds in his fund, Scion Capital.
In addition, although some
municipal bonds in the fund may not be subject to ordinary income tax, they may be subject to federal, state, and local alternative minimum tax, if an investor sells a tax - exempt bond fund at a profit, there are capital gains taxes to consider.
Whether the profit from the sale of
a bond in the fund is taxed at ordinary income tax rates or is eligible for a reduced capital gains rate is dependent on the same factors as explained above.
Bond Statistic Average Duration in Years: Expressed in years, average duration is a weighted average of the estimated price sensitivity of
the bonds in the fund's portfolio to a given change in interest rates.
Bond Statistic Average Coupon: The average coupon is the weighted average coupon rate of all
the bonds in the fund.
This means
the bonds in the fund should not decrease in value quite as quickly as the prices in the longer - dated Aggregate Bond fund.
Matt's take: YTM is a good indicator of what
the bonds in the fund are yielding at a current point in time.
What it means: This yield measure represents the weighted average YTM of
the bonds in the fund as of a date, assuming that the bonds will be held to maturity and that all coupon payments and the final principal payment will be made on schedule.
The dividend payments float as
the bonds in the fund change, and the value of the share price changes daily.
The bad news: Bond funds come with management fees, and the value of your investment will change as the market rerates the prices of
the bonds in the fund's portfolio.
A bond fund's average maturity represents the average length of time until
each bond in the fund reaches its specific maturity date.
That means you're looking to see how committed the funds are to
the bonds in their fund.
One thing you can do is find out the average duration and maturity of
the bonds in your fund (s).
Noload bond funds will have turnover that also varies, because of the average duration of
the bonds in the fund.
For example, if rates go up and
a bond in the fund has a maturity of two years, you're stuck with the lower rate only for those two years.
The types of
bonds in the fund's portfolio can vary; examples include government, corporate, taxable and tax - exempt bonds.
That means all
the bonds in the fund will come due in the same year, and once they're redeemed, the fund will be liquidated and all the money returned to investors.
The first is the «average term to maturity» of
the bonds in your fund.
The reason it pays that hefty 4.5 % distribution is that all
the bonds in the fund were issued several years ago, when interest rates were higher.
This can occur on a broad scale where a fund manager might alter the ratio of stocks to
bonds in his fund or it can apply to a single investment such as an investor selling a stock because she thinks it will go down in value.
You could lose money on your investment in the Fund or the Fund could underperform because of the following risks: the market prices of stocks or bonds may decline; the individual stocks or
bonds in the Fund may not perform as well as expected; and / or the Fund's portfolio management practices may not work to achieve their desired result.
The bonds in this fund are extremely safe with 90 % of their portfolio rated as A and above!
This duration figure means that if interest rates were to rise one percent this year, the value of
the bonds in this fund would fall approximately 2.7 %.
On their websites, many mutual fund companies report the average duration of
the bonds in their funds.
The average maturity is derived by adding up the maturities of
each bond in the fund and dividing it by the number of bonds the fund holds.
All
the bonds in each fund either mature or are callable in the same calendar year.
As prices of
bonds in a fund adjust to a rise in interest rates, the fund's share price may decline.