What is a primary characteristic of a bond fund?

A primary characteristic of a bond fund is its focus on fixed-income securities. These funds primarily invest in various types of bonds, including government bonds, corporate bonds, and municipal bonds. The objective of a bond fund is to generate steady income through interest payments, while also preserving capital. This emphasis on fixed-income securities distinguishes bond funds from other types of funds that may invest predominantly in stocks or equity securities.

In contrast, a focus on stocks would align with the characteristics of an equity fund, which is not the primary goal of a bond fund. Additionally, while some bond funds may provide a variable rate of return, particularly those that invest in different types of bonds with varying maturities and credit qualities, their essential distinction is the allocation towards fixed-income assets rather than equity. Understanding this characteristic helps investors make informed decisions based on their risk tolerance and income requirements.