Bond funds refer to funds in which more than 80% of fund assets are invested in bonds such as government bonds and corporate bonds. If all the funds are invested in bonds, it can be called a pure bond fund. If most of the fund assets are invested in bonds and a few can be invested in stocks, it can be called a bond fund. Theoretically, bond funds have higher potential returns and risks than pure bond funds.

Bonds invested by bond funds refer to government bonds, financial bonds and corporate bonds (including convertible bonds) listed on the inter-bank market or the exchange market. Bond funds combine bonds among these bond varieties in order to bring the greatest benefits to investors. The main income of bond funds comes from the interest income of bonds invested by the fund and the difference income of buying and selling bonds. Judging from the income sources of bond funds, they are relatively stable varieties. First of all, the interest income is stable, because bonds are a kind of fixed-income securities, and their interest is generally fixed (of course, there are floating rate bonds, and the interest is variable). For corporate bonds, no matter whether the business is good or bad, interest must be paid according to regulations, which is much more stable than stock dividends. As for the difference income between buying and selling bonds, there is some uncertainty, mainly because the bond price will change with the change of market interest rate. In the short term, the change of market interest rate is generally small (or has been expected), so this uncertainty will not be very high. Generally speaking, compared with other types of funds such as stock funds and hedge funds, the potential returns of bond funds are relatively stable and the potential risks are relatively small.

The risk of investing in bond funds is mainly interest rate risk, because bond funds mainly invest in bonds, and bond prices are greatly affected by interest rates, especially bonds with fixed interest rates. When the market interest rate rises, the bond price will fall, and vice versa. In addition, due to the different maturity structure of bonds, the risks are also different. Generally speaking, the interest rate risk of short-term bonds or floating rate bonds is smaller than that of long-term bonds, but the potential income may be smaller, because the coupon rate of short-term bonds is lower than that of long-term bonds. Bond funds can invest in bonds with different maturities, so they can avoid interest rate risks to the maximum extent and seek higher returns at the same time.