Presentation of bond funds

Bond funds invest investors’ savings in bonds. In doing so, however, they have a wide range of flexibility, as they can invest in short- and long-term government securities, corporate bonds, other bonds, mortgage bonds and other interest-bearing instruments.

Because of the wider range of investment opportunities and the longer maturity of the underlying assets, bond funds have a somewhat higher risk than money market funds. The price of these funds may fluctuate in the short term. Therefore, we recommend bond funds for investing funds available beyond the year and expect them to perform competitively with the returns available from government bonds. And the savings in the funds are accessible at any time.

Bond funds whose portfolio has an average remaining maturity of the underlying bonds of less than 3 years are called short bond funds. These funds are typically offered for the placement of funds available for 1–3 years to meet short-term financial goals.

Funds with an average remaining maturity of more than 3 years are called long bond funds. These long-term bond investments are sensitive to changes in the government bond market yield environment. They react to a falling yield environment by increasing the exchange rate and to rising yields by decreasing the exchange rate. Because of this sensitivity to market changes and the short-term volatility of exchange rates, we recommend a minimum of 3 to 5 years to achieve medium-term financial goals.

Characteristics of bond funds

• invest in government securities, corporate bonds, other bonds, mortgage bonds, other interest-bearing instruments
• carry some risk
• there are also bond funds with shorter, medium or longer time horizons