Bond Funds

A bond fund is a collective investment scheme that invests in bonds and other debt securities. Bond funds typically pay periodic dividends that include interest payments on the fund's underlying securities plus periodic realized capital appreciation. Bond funds typically pay higher dividends than commercial deposits (CDs) and money market accounts. Most bond funds pay out dividends more fre quently than individual bonds

Bond Funds can be classified by their primary underlying asset, these include government or treasury bonds, municipal bonds, corporate bonds or mortgage loans. Each class will offer different rates to reflect the security of the issuer- ie a western government would have a safer prospect than a new start up company in say Brazil.

Bond funds may also be classified by factors such as type of yield (high income) or term (short, medium, long) or some other specialty such as zero-coupon bonds, international bonds, multisector bonds or convertible bonds.

If you're buying a bond fund to give your portfolio stability or to help generate income, then your strategy may pay off.

If you think you can't lose money in bonds, guess again. Bond values move in the opposite direction of interest rates, so the value of your bond will go down when rates go up (and vice versa). That means you can lose principal in bond funds when interest rates rise.

Even if you buy individual bonds and hold them until maturity, you can lose money if you paid a premium for your bond.

Oyster Bay has the research tools to find the best buys, you can even ask us to manage your portfolio for you.

If the above fund class is not what you were looking for have a look at the capital protected notes section- upside is not guaranteed but the principle investment can be.