A bond fund, like a stock fund, can give an investor access to a diversified portfolio of securities that would be difficult for most individuals to attain through direct investment. Through a bond fund, individual investors typically gain access to bonds of denominations that may otherwise be out of their price range as well as 'institutional vehicles' – investments often unavailable to the general public – at reasonable prices

The fixed-income markets are generally less risky (smaller price fluctuations) than the stock markets – but reduced risk historically has meant you will give up something in long-term returns. Like stocks, total returns in bonds comprise regular income and capital gains. Bonds usually stress interest income, while stocks rely more heavily on capital gains. Stock prices tend to require continued corporate earnings growth to stay high, whereas bond prices are less sensitive to earnings growth, but more sensitive to interest rate moves. There is no guarantee, but should the economy and job market slow, for example, interest rates would probably fall further, which could result in additional capital gains for many bond and bond fund investors.

Past performance is no guarantee of future results. Individual bonds are designed to repay principal at maturity while bond funds maintain an average maturity and thus have no fixed maturity. Bond funds may offer greater risk to principal than individual bonds.

When buying a bond fund, you should pay more attention to the expense ratio than the yield. A fund, after all, can goose up its yield by taking big risks with your money. And when buying a closed-end bond fund, pay attention to the discount. Ideally, you want a taxable closed-end bond fund to have a discount at least 12 times its expense ratio—only ten qualify. So think about getting a no-load open-end bond fund instead. The grades tell you something about how risky a portfolio is. High-risk, long-maturity funds get good grades in bull markets and bad grades in bear markets. The reverse is true of low-risk short-maturity funds.

The Bond Fund invests in a diversified portfolio consisting of government securities, mortgages, corporate bonds, and short-term funds. This fund's return is largely affected by changes in interest rates.

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