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I personally think bond funds (not bonds) are a little risky right now.

There's another factor. If you have $1000 to invest in US government notes, or $10K put in investment-grade munis or commercial bonds, you should seriously consider bypassing the bond funds and purchasing individual bonds directly.

* If the value of a bond declines, you can choose to suffer the capital loss, or to hold to maturity. But if the value of the collection of bonds in your bond fund declines, the fund manager makes that choice.

* If the value of a bond increases, you can choose to take the capital gain if it makes tax sense to you. But if the value of the collection of bonds in your bond fund increases, the fund manager can choose to take the capital gain if it makes him and his fund look good.

* A $30 commission on a $1K bond held for 20 years is $30. A 0.3% expense ratio on a $1K bond-fund investment held for 20 years, assuming you withdraw all the intervening interest payments, is $60. That $60 has to come from somewhere; either it decreases your $1000 principle to $940, or it decreases the interest you receive.
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