What Are Core Bond Funds? (2024)

FAQs

What are core bond funds? ›

Core bond funds invest primarily in investment-grade U.S. fixed-income issues including government, corporate, and securitized debt, and hold less than 5% in below-investment-grade exposures.

Product summary. This actively managed fund seeks to provide broadly diversified exposure predominantly to the U.S. investment-grade bond market. The low-cost fund invests in U.S. Treasury, mortgage-backed, and corporate securities of varying yields and maturities (short-, intermediate-, and long-term issues).

What is the difference between core and core plus bonds? Core bond funds focus on liquid, investment grade bonds. Core plus funds add other bond asset classes that may provide more yield and return, including emerging market credit, high yield corporates, and convertibles.

A bond fund is a mutual fund or an exchange-traded fund (ETF) that buys and sells debt instruments like government and corporate bonds. The primary goal of a bond fund is to generate monthly income for investors. For an investor, a bond fund is an alternative to buying individual bonds.

Core real estate funds represent the most conservative blend of risk and return in the private real estate segment. They invest in the best properties in the best locations. Core plus real estate funds are one notch higher on the risk-return scale.

There's no one right answer—bonds or bond funds—for every investor. The decision often comes down to the amount you have to invest, the preference for a professional manager, and the need for a predictable value at maturity.

U.S. government and agency bonds and securities carry the "full faith and credit" guarantee of the U.S. government and are considered one of the safest investments. What that means: regardless of war, inflation or the state of the economy, the U.S. government pays back its bondholders.

What is the core plus bond strategy? ›

The strategy is a foundational fixed income portfolio that aims to deliver total return in excess of the Bloomberg U.S. Aggregate Index by allocating a minimum of 65% to benchmark sectors and up to 35% to global plus sectors.

The bond issuer promises to pay the investor money at regular intervals. On the other hand, a credit fund is a type of debt mutual fund that invests in bonds with low ratings. Thus, credit funds are high risk funds. Low rating bonds have a greater probability of default and thus offer a higher yield.

The disadvantages of bond funds include higher management fees, the uncertainty created with tax bills, and exposure to interest rate changes.

There are two ways to make money on bonds: through interest payments and selling a bond for more than you paid. With most bonds, you'll get regular interest payments while you hold the bond.

What causes bond prices to fall? Bond prices move in inverse fashion to interest rates, reflecting an important bond investing consideration known as interest rate risk. If bond yields decline, the value of bonds already on the market move higher. If bond yields rise, existing bonds lose value.

Buying individual bonds can provide increased control and transparency, but typically requires a greater commitment of time and financial resources. Investing in bond funds can make it easier to achieve broad diversification with a lower dollar commitment, but offers less control.

Bonds are generally more stable than stocks but have provided lower long-term returns. By owning a mix of different investments, you're diversifying your portfolio. Doing so can curb the risks you'd assume by putting all of your money in a single type of investment.