What is a bond fund?
Well first of all the first thing that you must know is, a bond fund or a fixed income bond as it is also known, is simply a loan in the form of security.
In the case of bond funds the borrower is usually the government, or companies such as IBM. By issuing these bonds, these borrowers can raise money from the public.

Bonds are promises to pay back the original amount plus interest, the same as a bank loan or credit union loan.
Although bonds are less risky than stocks, they still carry their own risks, due to inflation,prepayment and credit risks. Bond funds can be used to create a regular income-especially when you are close to retirement.
Bond funds have become very popular of late, as they are convenient for most people, and provide diversification.
Bonds can be very complicated so it is a lot easier to have someone to manage your portfolio, such as a professional funds manager, and have him pay you on a regular monthly basis.
When creating your portfolio, it is strongly recommended to use bond funds, as they balance out a portfolio. Bond funds behave differently to stocks, so they would also be safer to manage.

The best bond uses would be;
*Portfolio risk reduction- as mentioned earlier are a great way to balance out
your stock holdings.
*Emergency money- short term funds can be reinvested, and they offer check
writing privleges.

Bond funds are often catagorized as:
*Municipal bond funds-uses tax exempt (non taxable) bonds issued by the state and local governments.
*Corporate bond funds-uses the debt obligations of corporations in the U.S.
*Mortgage backed securities funds-uses securities representing residential mortgages.
*U.S government bond funds-uses the U.S treasury, or government securities.

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