I know this is a basic question but I have been trying to get a straight answer to this and so far I have seen two answers:
1. Yes, bond mutual funds pay a coupon like an individual bond does, the coupon will just be an average of all the bonds in the fund
2. No, the coupon payment stays with the fund and gets reinvested so the fund can buy more bonds
Could someone please clarify which is the correct answer for me? I'm trying to reallocate my investments to be higher on the bond side and if the answer to my question is #2, no, I wouldn't want to go with the options they are providing.
If the answer varies by fund, perhaps we can just discuss FXNAX.
Thank you in advance