Final Fans

Like stock mutual funds, there are all types of bond funds—from those that specialize in Treasury securities (the safest, with the lowest return potential) to riskier funds that specialize in corporate bonds and offer potentially higher returns. Municipal bond funds usually offer lower returns but are generally tax-free. Regardless, bond funds allow you to take advantage of the same kind of diversification and professional management offered by stock funds. In addition, they can be a convenient way to get monthly income.
One word of caution, though: Unlike individual bonds, bond funds may not provide reliable income payments and do not have set maturity dates. Because a bond fund is a combination of many bonds, their income and principal values will vary based on market conditions and the fund’s underlying holdings. Put more simply, when you decide to sell shares of your bond fund, you will get the current share price (NAy), which may be more or less than what you paid for it.