Bond Fund

Business, Legal & Accounting Glossary

Definition: Bond Fund

Bond Fund

Full Definition of Bond Fund

bond fund is a mutual fund that invests in bonds.

A bond fund is considered a fixed income. Most bond funds pay interest monthly, and rates tend to be steady, but the interest paid does change gradually along with changes in the investment portfolio. The yield that bond funds pay tends to track market rates, but the NAV varies rather than the interest paid per share.

The NAV of a bond fund changes with the market value of its portfolio. Most funds recalculate the NAV at the close of every business day, and that NAV then becomes the trading price for all pending buy and sell orders. Newspapers and other information agencies receive that number as being the price of the fund’s shares until the close of the next business day.

Bond funds come in a variety of styles, including tax-free, municipal, long, short, corporate, high-yield, closed-end, and government (including Treasuries and Government National Mortgage Association bonds). Some bond funds are leveraged.

Investors choose bond funds for their professional management and diversification. Most investors considering bond funds should seek out investment-grade bond funds as their core investment and should consider the average maturity of each fund.

As with bonds, the yield, and NAV of a bond fund changes with interest rates. A short-bond fund tends to be less volatile and generally carries a lower risk. Funds with a longer average maturity pay higher interest, but their NAV will vary more with interest rates and related news.

Individual investors who own bonds directly have the ability to hold their bonds to maturity and collect their face value. Bond fund owners do not have that option. But one usually needs to invest $25,000 or more in a bond portfolio, so small investors are generally better served by buying bond funds rather than individual bonds.

Related Phrases

Corporate bond fund
High yield bond fund
International bond fund
Junk bond fund
Mutual fund
Government bond fund
GNMA fund
Tax-free bond fund
Treasury bond fund

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Bond Fund. Payroll & Accounting Heaven Ltd.
January 26, 2022
Chicago Manual of Style (CMS):
Bond Fund. Payroll & Accounting Heaven Ltd. (accessed: January 26, 2022).
American Psychological Association (APA):
Bond Fund. Retrieved January 26, 2022
, from website:

Definition Sources

Definitions for Bond Fund are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 16th October, 2021 | 0 Views.