What Are Mutual Bonds?

by Spencer Hendricks ; Updated April 19, 2017
Every investor's dream is to end up with a large profit return.

The art of investing money takes a great deal of research and skill. The process can be very overwhelming to a beginner. Thankfully, many options exist for smart investors in the form of bonds.

Types

Bonds come in many forms, including local or state government-issued municipal bonds, company-issued corporate bonds and U.S. government bonds.

Function

Mutual bonds are considered a lower risk than other bond types, in the sense that they earn the investor a profit in addition to protecting the principal investment.

Benefits

Aside from the low risk involved, a big plus for mutual bonds is the diversification they offer. Instead of making an investment in individual bonds, mutual bonds will also invest in other debt securities at the same time, without having to buy bonds from several different companies.

Risks

Despite being less at risk than other types of bonds, even mutual bonds are not without danger. Like any other bond, they are subject to problems with credit and interest rate changing for the worse after the investment has been made.

Considerations

Keep in mind that mutual bond funds typically come with a funds manager, which will result in more money required on the part of the investor.

References

About the Author

Spencer Hendricks has written for various well-regarded blogs. His work has appeared in the "Kickapoo Prairie News" and online at sprayahen.com and Spencer Vs. The Food Industry. He is currently in the process of obtaining a degree in Web development.

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