Mutual Funds, Bonn, Europe discussed on The Investment Show with Sanford Family Financial


Phone could morning paul yeah i fairly how you doing good how're you could have i would have liked to get to a question about reading on districts on bond mutual funds but first i'd like to describe how i think bonds works so we can be talking about the same terms sure so supposedly i by a bond a threeyear bond paying one percent interest now a year later i have a two year bond but the maturity dimarco maturity is changed to two percent so i probably have a bond that scott the dividend the coupon is two percent on the mountain to her part of my bond it's one percent yeah puts into two year but later upmarket for two bonds is who prieta there's interest rate has increased yeah okay oh i probably have a bond that's cover current values about ninety eight dollars and it's paying one percent yet because of why would someone went to buy your bonn when they can buy a new one at par what's use par is the example at one hundred dollars site for two percent so the market's going to say well in order to entice someone a by gene threeyear at scott a one percent coupon they've got to the bite at a discount to the par right okay now supposing somebody what kind of i might bond they could by for ninety eight hours and they will be sitting there say saying this is a secure bond so i'm gonna get one percent interest but i'm gonna get to two dollars increase value over the next two years and it's going to gain money two different ways that's right now the dividend that coupon that dividend of your three europe will remain at one percent but at maturity they're gonna they're gonna get one hundred dollars for the bond as apoe as opposed to when they bought it at ninety eight correct okay so we're we're at a fair pace now here's my real question supposing i'm looking at supposin there's a mutual fund and this is the only bomb they have th there's a mutual fund with only this bond in hundreds of examples of this bond and i'm looking at these statistics on the mutual fund so the first thing i look at this a.

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