No. of Recommendations: 1
For corporate bonds, a mutual fund may be a necessary evil. But for Gov't bonds they make little sense

Yes, in your example -the man who's never saved a penny, then discovers $100,000 in his basement, which we won't need for exaclty 10 years- buying individual bonds is the way to go.

But most people I know don't invest this way. Instead they manage to spend a little less than they earn each week and invest that savings regularly in either a 401k or taxable account. For them, a bond fund makes a lot of sense, especially since they can get exposure to Agencies, Treasuries, and corporates in one fell swoop.

Even in your $100,000 example, buying individual bonds is risky, since you're wealth is concentrated at a single interest rate. Bond funds offer diversification over time as well- an instant ladder. I think they're anything but a necessary evil.

Nick
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