Bond Funds and ETFs

Most individual investors own bonds through funds rather than buying single bonds. Funds offer instant diversification and easy trading, but they behave differently from individual bonds. Here is what to know.

Why funds

A bond fund holds hundreds or thousands of bonds, so one default barely matters. You can buy or sell in small amounts, and interest is paid out, usually monthly. Broad index bond funds charge very little, often under 0.1% a year.

A fund bundles many bonds into one share.

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