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A bond mutual fund is one of the best passive forms of investment. The dividends that are received from a bond mutual fund are what make this type of investment so attractive. Here are the basics of dividends from a bond mutual fund and how they work.
Dividends
Bonds are debt instruments issued by corporations and government entities. When an investor purchases a bond, the bond issuer will pay that bondholder a certain amount of interest over the life of the bond in regular payments. A bond mutual fund owns hundreds or thousands of bonds and receives regular interest payments on all of these. Therefore, the investors in a bond mutual fund receive these dividend payments from the interest payments on the bonds.
Receiving Dividends
A bond mutual fund can be a good way to create a regular income for yourself. These types of funds typically pay out once a month to their investors. You will receive your share of all of the interest as well as any capital appreciation that was experienced from a change in bond pricing due to interest rate fluctuations.
