CONTACT US
Enter your Name, Email Address and a short message. We'll respond to you as soon as possible.
1021223-00006-00
Rogelio Gonzalez, CRPC®, CSRIC™
Financial Advisor, Prudential Advisors
Pacific Northwest Financial Group
7525 SE 24th Street, Suite 110
Mercer Island, WA 98040
Phone: 360-919-4271
July/August 2024
Understanding Bond Funds
Investors whose goal is to preserve capital may want to consider investing in bond funds,* which offer diversification while minimizing the risk of losing principal. Funds pay regular interest that can provide investors with a predictable income stream during retirement.
What Are Bonds?
Bonds are debt securities. When you buy a bond, you’re lending money to the bond issuer, which can be a corporation, a municipality or the government. In return, the bond issuer pays you interest for the bond’s duration. A bond fund holds securities from many different issuers, providing diversification and reducing the risk of default.Bond Types
Bonds fall into three main categories:Corporate bonds are issued by public and private corporations. Investment grade bonds have a high credit rating and low risk. High-yield (“junk”) bonds are from companies with a lower credit rating and a greater risk of default. Junk bonds pay higher interest to compensate investors for the increased risk.
Municipal bonds are issued by states, cities, counties and other government entities. They’re used to fund projects, such as roads, hospitals and schools, that benefit communities. Interest from municipal bonds generally is exempt from federal — and sometimes state and local — taxes.
Government bonds invest primarily in U.S. debt securities across a broad range of sectors, including Treasuries, government agency bonds and mortgages. Bonds are guaranteed by the U.S. government and present the least risk to investors.
Bond Risks
Bond funds typically don’t carry the risk that comes with investing in individual bonds. If one issuer in the fund defaults, there are many others to dilute the impact. However, investors should be aware that bond funds still have risks that could impact returns. Inflation risk occurs if rising prices reduce the purchasing power of bonds. Interest rate risk occurs when rising interest rates cause existing bond prices to drop.Bond funds can be a good choice for providing retirement income. Your financial professional can offer guidance.
*Investors should read the prospectus and consider the investment objectives, risks, charges, and expenses of the fund before investing. Past performance won’t guarantee future results.
1058823-00003-00
Prudential Advisors is a brand name of The Prudential Insurance Company of America and its subsidiaries. Offering investment advisory services and programs through Pruco Securities, LLC (Pruco), under the marketing name Prudential Financial Planning Services (PFPS), pursuant to a separate client agreement. Offering insurance and securities products and services as a registered representative of Pruco, and an agent of issuing insurance companies. 1-800-778-2255. Prudential and its representatives do not give tax or legal advice. Please consult with your own advisors regarding your particular situation. Prudential, the Prudential logo, and the Rock Symbol are service marks of Prudential Financial Inc., and its related entities, registered in many jurisdictions worldwide. Pacific Northwest Financial Group and LTM Marketing Specialists LLC are unrelated companies. This publication was prepared for the publication’s provider by LTM Client Marketing, an unrelated third party. Articles are not written or produced by the named representative.
The information and opinions contained in this web site are obtained from sources believed to be reliable, but their accuracy cannot be guaranteed. The publishers assume no responsibility for errors and omissions or for any damages resulting from the use of the published information. This web site is published with the understanding that it does not render legal, accounting, financial, or other professional advice. Whole or partial reproduction of this web site is forbidden without the written permission of the publisher.