BOND FUND

Bond Fund
• A bond fund or debt fund is a fund that invests in bonds, or
other debt securities. Bond funds can be contrasted with
stock funds and money funds. Bond funds typically pay
periodic dividends that include interest payments on
the fund's underlying securities plus periodic realized capital
appreciation.
• Bond mutual funds are mutual funds that invest in bonds. ...
The managers then purchase and sell bonds based on
economic and market activity. Managers also have to
sell funds to meet investor redemptions (withdrawals). For this
reason, bond fund managers rarely hold bonds until maturity
• It's important to remember that bond funds buy and sell
securities frequently, and rarely hold bonds to maturity. That
means you can lose some or all of your initial investment in
a bond fund.
How to buy bond
• You can buy almost any bond at your brokerage or local bank.
Brokers charge a small commission or they may mark up
the bond price instead – clarify this with your broker before
confirming that you want to buy. Government bonds are issued
by national governments. Corporate bonds are issued by
businesses.
Who can issue a bond in Malaysia
• A public company listed on Bursa Malaysia (PLC); A licensed
bank; An unlisted public company whose bond and
sukuk issuance is guaranteed by Danajamin Nasional Berhad,
Credit Guarantee and Investment Facility or any of the eligible
issuers above.
• Bond funds are generally less risky than stock mutual funds.
But investors are wise to understand that the value of a bond
fund can fluctuate. The best idea for investors is to find
suitable bond funds, hold them for the long term, and try not to
pay much attention to fluctuations.
• There are two ways to make money by investing in bonds. The
first is to hold those bonds until their maturity date and collect
interest payments on them. Bond interest is usually paid twice a
year. The second way to profit from bonds is to sell them at a
price that's higher than what you pay initially.
How a bond fund works
Your bond fund is made up of a series of individual bonds carefully selected by the
fund manager. This is how those individual bonds work:
•A government or a company issues bonds. A company may issue a bond to help
finance new business opportunities, or a government may use it as a way of helping
finance their infrastructure.

•The bond is issued at a fixed price. This is called the face value. The issuer of the
bond will repay the face value to the bondholder at the redemption date. The face
value may be different to the price that was actually paid for the bond as the bond
may have been bought and sold in the open market.

•Bonds can be bought and sold in the open market throughout their lifetime. Once
bought, you do not have to hold onto it until the redemption date.
•Although the price of the bond is set at the beginning of its lifetime and at maturity,
it will fluctuate between these times. The price of a government bond is affected by
factors such as inflation and government base rates. Economic factors such as
interest rates, and the fortunes of the issuing company affect corporate bonds.
Bond funds are seen as an income generating investment, and
therefore they will appeal to anyone with an income need, such as
someone nearing retirement.
Even better, any interest income or profit earned from the Fund
(at least, from certain fixed income securities) is exempt from tax.
In times of low inflation, investing in bonds is a good way of
maintaining a stream of income that will have a high 'real' value.
In addition, in times of low interest rates, the income received
from a bond fund investment will be higher than that offered by
the banks. Although of course a bank is always the safest place for
your money compared to a bond fund where the value of your
investment can fluctuate and you may not get back your original
investment.