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If you buy Treasuries, you are basically betting that the economy will get worse. (You will get your entire principal back if you hold the bond to maturity, even if interest rates rise. If you bought into a bond fund instead of an individual bond, your fund's NAV would drop and you would not recover your principal, since bond funds do not have a maturity.)

Hi Wendy,

This is sort of a red-herring, in that, if you hold your bond to maturity, in a constantly rising int. rate environment, one would invest 2011 dollars, and get back 2021 dollars, massive loss of purchasing power! If this scenario occurs, one would be better off with the fund, selling out with a small loss, and waiting for a better entry point, bonds or funds. The commission from Scottrade would be miniscule, compared to the commissions from a broker to sell a few indiv. bonds, IMO.

The bond fund however, consists of an extensive ladder, with bonds maturing every few months. The proceeds are then utilized to buy more bonds with the current(at that time) yield.

A never ending conundrum...

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