Bond funds invest primarily in bonds or other types of securities that represent debt. They generally take higher risks than money market funds, largely because they tend to follow strategies aimed at generating higher returns. Unlike money market funds, SEC rules do not restrict bond funds to high-quality or short-term investments. Because there are many different types of bonds, bond funds can vary dramatically in their risks and rewards.
All investments involve a certain degree of risk. Stocks, bonds, mutual funds, and exchange-traded funds can lose value even in full value if market conditions worsen. Even conservative insured investments, such as certificates of deposit (CDs) issued by a bank or credit union, carry a risk of inflation. In other words, they may not earn enough over time to keep up with the increase in the cost of living.
The bottom line is that all investments involve some degree of risk. By better understanding the nature of risk and taking steps to manage it, you'll be in a better position to meet your financial objectives. All funds carry a certain level of risk. With mutual funds, you can lose some or all of the money you invest because a fund's values may fall in value.
Dividend or interest payments may also change as market conditions change.