Fixed Income / Bonds

[PaulNYC]

If you want a fixed (i.e. rate guaranteed) income, and you're holding to maturity, you don't have to worry too much about price fluctuations. If you buy an open-end bond fund, your income isn't fixed.

If you're buying "full faith and credit" bonds it's fine to buy your own. If you're buying anything with any credit risk whatsoever the overwhelming majority of people should not be buying individual bonds. Not only are you risking default because you want your income to be "fixed" you are getting ripped off on pricing. At work I can often buy and sell bonds several points better than what I see on retail platforms.

 

[boredelaire]

Bond funds also carry default risk -- potentially less risk due to diversity, or greater risk due to riskier holdings (vs. individual holdings). Leveraged bond funds carry a cost of borrowing risk. Despite higher bid/ask spreads, swapping for tax losses is usually better managed through individual bonds. The spreads are less important when holding 10 year+ bonds to maturity. If I buy an open-end bond fund it's with the understanding that it doesn't provide a fixed income or fixed maturity.

 

[PaulNYC]

If you use a large fund group like Fidelity or Vanguard the bond fund doesn't carry "default risk". Some of the underlying bonds in the fund will default but they have hundreds if not thousands of line items so odds are you won't even notice the defaults. Have you done the math over a long period of time to see the returns on an open ended low cost bond fund vs. owning individual bonds? As I said, for the overwhelming majority of people they are better off in a bond fund than they are buying individual bonds.

As far as a leverage bond fund goes you would have to compare it to buying bonds on margin not to just owning bonds outright.