I'm trying to get a sense for what to (very roughly) expect in terms of bond funds return on investment as compared to a guaranteed investment, like CDs.
Here is an example fund and its reported "after-tax returns" (note: the site states that taxes are computed at the highest possible rate):
I am a little unsure how to read this. Here are some questions about that section, taking them somewhat out of order:
- "Returns after taxes on distributions". What are distributions? I'm assuming these are quarterly dividends paid to fund holders? So this is saying that in the past year, fund holders received 3.93% of their investment back in dividends (after taxes)? That is, if one invested $10,000, one would have received $393 in (tax-already-paid) dividends this year?
- "Returns after taxes on distributions and sale of fund shares". Is this then the returns considering both the distributions and if one sold off one's entire fund holdings? Since this value is less than just the distributions, that suggests that the value of the one share of the fund has decreased (slightly) in this past year. In fact, that appears to be true for the entire time since inception.
- Now then, what would simply "Returns before taxes" mean? Is that, as in question 2, combining both dividends and sale of fund shares and giving the value before taxes?
- Is the "Average Intermediate-Term Bond Fund" section there to just have a comparison of this fund with the average out there in the market?
I'm mostly interested in having an alternative to CDs and am probably not suited to active trading of funds, so am looking for something to hold and accrue dividends, so final question:
- Is there a way to know what the bond fund is currently paying in terms of dividends, the way a single bond states its "coupon", or is that determined by some market effects, and if so, what are they?