No. of Recommendations: 3
Here's my $0.02.

Intercst had a good point, and so did cliff666.

My take, never by bond funds. Why? Can lose principle. You can by individual bonds as long as you keep them to maturity there is less chance to lose principle and change in interest rates won't effect them. However, you have the risk of the issueing company defaulting (thus chance to lose principle).

My solution, by CDs. Typically small difference in a 3-5 year CD and a bond, at least to me when you consider chance of default. Therefore, for my cash/interest bearing portion of portfolio, it is CDs for me.

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