What is a Bond Fund?

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Bond funds are mutual funds that invest in bonds which are debt securities issued by governments and corporations. Bonds funds are unlike individual bonds in the fact that they never mature. The share value and dividends fluctuate as bonds are sold or mature and when more bonds are purchased. The profits from bond funds are seen in the dividend distribution not the increase in share value as is with stock funds. Investing in bond funds may result in modest capital gains but is not the goal of the funds. There are three main types of bond funds, government, municipal, corporate.