Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 359

The style box for bond funds is somewhat similar to that of the stock funds. The horizontal axis defines the average maturity length of the bonds invested in, while the vertical axis defines their quality (remember Moody's ratings). Here is an example of a bond fund's style box:

Bond Style Box

  Short-Term Intermediate-Term Long-Term
High-Quality 1 2 3
Medium-Quality 4 5 6
Low-Quality 7 8 9

The cells pretty much define the same kind of risk/reward relationship as the stock fund style box's cells. So the bond fund in our example is a high-risk (with high return potential) fund most likely made up of long-term (10 or more years to maturity) junk bonds.

Again, remember that the style box is only a quick snapshot of a fund's current investment style. It is a very helpful tool to get an immediate reading, but it is no substitute for a more in-depth study of the fund's characteristics, including the specific securities that make up its portfolio.

Expenses

One of the biggest drawbacks of funds is their cost. You wouldn't think that an investment company would just create a fund and open it up to investors out of the goodness of its heart. They are in it for the money. The simple fact is that funds have their own costs to operate. Someone has to pay the salaries of the fund manager, the analysts, the advisers, marketing costs, and other administrative fees, and that
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  • Book Chapters
    Table of Contents Copyright and Disclaimer Foreword Money
    Bonds Futures Stocks Options
    Mutual Funds Retirement Final Words Appendix A

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