Do you want to learn about the Absa bond fund in South Africa? Then check out this guide.
A bond fund is a pooled investment vehicle that invests primarily in government, municipal, corporate and convertible bonds and other debt instruments like mortgage-backed securities.
The primary goal of this fund is to generate income for investors by exposing them to the South African bond market and other interest-bearing instruments.
First, we will show you a few things you need to note about this fund.
What You Need To Know About Absa Bond Fund
Bond funds do not have a maturity date for principal repayment, so the amount invested may fluctuate from time to time.
Interest payments are made every month and reflect the mix of all the different bonds in the fund.
Interest income distribution varies monthly.
Every bond has a fund manager who buys and sells according to market conditions and rarely holds bonds until maturity.
These are the key things to note about the Absa bond fund in South Africa.
Absa Bond Fund
This product predominantly invests its assets in South African bonds, corporate bonds, gilts, fixed deposits, and other interest-bearing instruments.
The fund is ideal for your medium to long-term investment plan and aims to give you an above-average income and capital growth.
The fund exposes you to more volatility than money market and traditional income funds.
The fund offers diversification from the Absa equity shares.
There is a potential to earn high returns with more volatility than money market and traditional income funds.
These are the features of the Absa bond fund in South Africa.
What Are The Risks
The insurers of fixed income investments may not meet the interest payments or repay the money borrowed.
Investment may be lost in cases where the bond’s issuer has bad credit quality.
The value of bonds tends to decrease when interest rates and inflation rises.
There may be insufficient buyers or sellers of particular investments, which may cause delays in trading and making settlements from the fund.
Large fluctuations in the fund value may cause substantial financial losses.
You should therefore assess the risk statistics before investing with the bond fund.
This is all you need to know about the Absa bond fund in South Africa.