Fishing for Returns

Investors are hungry forinterest income. To see
which kinds of bond mutual
funds did best last year,
simply take a look at their
yields.
Interest rates are low on
all kinds of bonds – from
safe government
Treasurys to bonds issued
by companies with poor
credit ratings. This led many
investors to put their money in
funds with the highest yields.
But keep in mind that returns
for bond mutual funds come from
two sources: the interest that the
bonds pay, plus any price increases
of the bonds in the fund portfolio.
Investors are hungry for interest income. To see which kinds of bond mutual funds did best last year, simply take a look at their yields.
Interest rates are low on all kinds of bonds – from safe government Treasurys to bonds issued by companies with poor credit ratings. This led many investors to put their money in funds with the highest yields.
But keep in mind that returns for bond mutual funds come from two sources: the interest that the bonds pay, plus any price increases of the bonds in the fund portfolio.