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Canada Bond Funds
A Canada Bond Fund is a mutual fund investment in most cases. In some cases a Canada Bond Fund can be held as a segregated fund or guaranteed investment fund. The exact type of debt the fund invests in will depend on its focus, but investments may include government, corporate, municipal and convertible bonds, along with other debt securities like mortgage-backed securities.
Canada Bond Rates
The past twenty years have seen domestic interest rates come down from historic highs reached in the early eighties to the lows of today and investors who have relied on the income and returns from Canada Bonds and Canadian Bond Funds or other types of Bond Funds in Canada are now facing difficult challenges.
The potential rate of return earned on a bond fund will be based on a variety of factors including the current yield on the bonds in the fund and the increase or decrease in the unit value of the fund due to an increase or decrease in bond interest rates. The value of a bond (shown through its market price) can go up or down and depends on current interest rates. If interest rates go up, bond prices go down and sell at a discount. If interest rates go down, bond prices increase.
In addition, if one factors in the MERs (Management Expense Ratio) associated with investments in Canadian Bond Funds, and the current yield on these funds, the potential return for these investments can be somewhat limited.
Risks involved in a Canadian Bond Fund: concentration risk, currency risk, derivative risk, fixed income risk, foreign market risk, general market risk, large investor risk, legal and regulatory risk.
-In an interest rate environment like today, where rates are fluctuating and trending one way or the other, bond funds may not reduce overall portfolio volatility.
-There is no guarantee a bond fund will increase in value over a specific period; 1998 and 1999 offer a good example.
Canada Bond Funds are offered in certain Guaranteed Investment Fund products as well.
Considering that Canadian Bond Rates being so low, many investors in Canada are now looking for better alternatives and various investment options that do provide some form of guarantee and capital preservation,
- Visit Guaranteedinvestments.com for more detail on Guaranteed Investment Products.
Guaranteedinvestments.com does not offer or provide advice on Bond Funds or Mutual Funds in Canada.
Investors looking for safety and capital preservation visit Guaranteedinvestments.com. The advisors at Guaranteedinvestments.com specialize in products like guaranteed investment funds, segregated funds, annuities, insured annuities, guaranteed minimum withdrawal benefit plans, guaranteed lifetime withdrawal benefits plans and other types of secure investments.
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