One of the most common investments many people could have is a fixed financial vehicle, specifically a bond. This is a different vehicle than a bond mutual fund, but they are commonly confused with one another. Today we’ll be discussing the differences between a bond and a bond mutual fund.
Bond
A bond is a product that is purchased to be held until it reaches its maturity date. Once you’ve reached that maturity date, you can withdraw the bond. The idea here is you’re purchasing a product that is “safer” than being connected to a market that has its up and down years. By having an end date, you can more or less count on there being a yield of a certain amount.
Bond Mutual Fund
A bond mutual fund, however, is a collection of bonds that are subject to market fluctuation. This may have a greater growth potential, but there is also a greater risk of loss. The bonds in your mutual fund are being sold and bought to create the return in your portfolio. There may be years that certain bonds in your collection of funds suffer a loss while other bonds are gaining value.
Both individual bonds and bond mutual funds may have their place in your financial portfolio, but it’s important to understand their uses, pros, and cons. If you’d like to learn more about how each of these products could be used in your own portfolio, contact Hoffman Financial Group today.