Get Under the Hood of Bond Funds
Morningstar's fixed-income style box offers a quick visual summary of a given fund's portfolio, offering insight into interest rate sensitivity and credit risk.
Most of us wouldn't buy a new home just because it looked good from the outside. We would do a thorough walk-through first. We'd examine the furnace, check for a leaky roof, and look for cracks in the foundation.
Mutual fund investing requires the same careful investigation. You need to give a fund more than a surface-level once-over before investing in it. Knowing that the fund has been a good performer in the past isn't enough to warrant risking your money. You need to understand what's inside its portfolio--or how it invests. You must find out what a fund owns to know if it's right for you.