How does yield effect Bond Funds?

What does yield percentage do for the owner of a bond fund? Does it effect
your taxes or income?

Re: How does yield effect Bond Funds?

W. Wells wrote:
> What does yield percentage do for the owner of a bond fund? Does it effect
> your taxes or income?

It can affect both.

Re: How does yield effect Bond Funds?

"W. Wells" <> wrote in message
news:VtjKf.14919$
> What does yield percentage do for the owner of a bond fund? Does it effect
> your taxes or income?

The higher the yield the more investment income you'll get per dollar
invested and the higher the figure will be on your 1099-DIV.
Personally. I prefer using dollar figures to yield. The yield fluctuates
with the security price.

Re: How does yield effect Bond Funds?

"W. Wells" <> wrote
> What does yield percentage do for the owner of a bond fund? Does it effect
> your taxes or income?

Is the bond fund held in a 401(k) or an IRA? Or is it in what's called a
"taxable account"?

Re: How does yield effect Bond Funds?

You pay taxes on the dividends you get from a bond fund. Those
dividends are dependent on the yield. If interest rates go up, the
value of your bond fund goes down, because the yield is "fixed" and
that yield is yesterdays yield and not as attractive as todays yield,
so you have to discount the value of the bond.

But bond funds have bonds that expire and they reinvest at the higher
yields, so it is an elastic sort of thing that generally just follows
the bond index.

It is always debatable whether buying a bond fund or buying bonds
themselves is a better investment. For most small investors, being in a
bond fund is better. Find a LOW COST one (like Vanguard's).

Re: How does yield effect Bond Funds?

"Doug" <> wrote
> You pay taxes on the dividends you get from a bond fund. Those
> dividends are dependent on the yield.

God knows what the OP was asking, but may as well mention that there are
bond funds with reduced taxes, due to participation in federal bond and
municipal bond purchases.

> If interest rates go up, the
> value

"Net asset value," not value.

> of your bond fund goes down, because the yield is "fixed" and
> that yield is yesterdays yield and not as attractive as todays yield,
> so you have to discount the value of the bond.

He means that as interest rates climb, yield climbs, but NAV falls.
Generally speaking, for high grade bond funds.

> But bond funds have bonds that expire and they reinvest at the higher
> yields, so it is an elastic sort of thing that generally just follows
> the bond index.
>
> It is always debatable whether buying a bond fund or buying bonds
> themselves is a better investment. For most small investors, being in a
> bond fund is better. Find a LOW COST one (like Vanguard's).

In a rising interest rate environment, avoid intermediate and long term bond
funds. Buy individual bonds of a high grade, maybe laddered, unless you want
to gamble.