Bonds & rates
Bond fund
A fund holding many bonds, offering diversification but no fixed maturity date.
How it works
A bond fund continuously buys and sells to maintain a target maturity range, so its duration stays roughly constant rather than shortening over time.
The consequence is that it never matures. An individual bond returns your principal on a known date; a fund simply has a price.
Where it misleads people
This is the difference that surprised people in 2022. Someone holding an individual bond to maturity got their money back; someone holding a long-duration bond fund had a permanent-feeling loss to earn back.
Related terms
- Interest-rate riskThe risk that rising interest rates reduce the market value of bonds you already hold.
- DurationHow much a bond’s price moves when interest rates change, expressed in years.
- BondA loan you make to a government or company, which pays you interest and returns your money on a set date.
- Net asset valueThe value of everything a fund owns, minus what it owes, divided by the number of units.
More in Bonds & rates
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.