When doing these entries, it's always best to keep it simple, and for those of you who have been long this market, bond funds are complex as are bonds themselves. So, why complicate it more when bond funds are simply a mutual fund that contains types of bonds such as municipal, government and corporate bonds. The objective of these funds is generally to generate stable income with out a huge risk; however you can still loose money.

It's important to remember that bond funds are sensitive to interest rates. Its simple economics that when interest rates increase, the return of the bond fund will likely decrease, this is called duration. Duration simply is the bond fund's sensitivity to interest rates. You can't put a price target or evaluation on a bond fund's performance and expect it to be consistent; since the economy is ever changing so will the effects of these bond funds.

Bond Funds are for those who are nearing retirement or are in retirement and need to put their IRA money in something safe and secure, bond funds are a good answer to this problem. For those of you who don't want to pay the prices for mutual funds but still want to play the bond market, there are a variety of bond ETF's to play. For full disclosure reasons I have shares in iShares Lehman 20 Year Treasury Bond (TLT), as my bond diversification as it invests primarily in government treasuries.