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"If a person wants to hold ay 25% of their portfolio in bonds, only tapping into the distributed interest, but never selling the actual bonds. In such a case, can a bond fund be as good as laddering CDs?"

In so many words, approximately yes, but not exactly so.

So yes, if you are willing to ignor the NAV of your bond shares and focus on the interest being paid, that is fine in most cases. Realize that interest rates will have to return to where they were when you bought them for the NAV to return. So eventually you may be forced to sell at a loss--especially if you bought the bond fund shares when intrest rates were at historic lows.

Now that interest rates have returned to more normal levels, that is less of a concern, but you would still rather buy a bond fund when interest rates are high. Then you have accumulated capital gains you can cash in whenever you want.

The laddered maturity bond portfolio avoids this risk because usually those bonds can be held to maturity. So you get full face value back regardless of what happens to interest rates.

And note that we are talking about investment quality bonds and bond funds. For junk bonds, all bets are off. They can collaspe in value very much like stocks crash, the bonds can default, the underlying companes can declare bankruptcy. All of which can mean your investment is not secure. Junk bonds should be acceptable only as part of a divsified portfolio and then not with the rent money.
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