Recently I was looking at a number of bond mutual funds to invest in, and one was called GNMA. It seemed to be some sort of government or municipal bond. What are GNMA bonds, and are they a good investment?


GNMA Bonds are Government National Mortgage Association bonds, aka a bond backed by mortgages, aka a mortgage backed security. Generally you would be subject to both federal and state taxes on whatever proceeds you receive, if any. Generally the assigned rating and risk category is a result of a guarantee on the principle and interest payments of these bonds. The guarantee is offered by the Federal Housing Administration and the Department of Veterans Affairs. This guarantee should make the bonds relatively safe but will cause the bond to have a relatively low yield.

Whether or not they're a "good investment" is for you to decide.

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