---
title: Should I Invest in Bonds or in a Bond Mutual Fund?
description: Which is better, buying individual bonds or investing in a bond mutual fund? Here's what you need to know to help you make a decision.
authors:
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published: '2014-05-27T14:21:49.000Z'
modified: '2024-04-02T04:37:55.000Z'
section: Investing
tags:
  - bond mutual fund
  - bonds
  - diversify
  - invest
  - Investing
  - investment
  - mutual funds
canonical: https://money.com/collection-post/investing-bonds-or-bond-mutual-funds/
type: Article
source: structured-blocks
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![Should I Invest in Bonds or in a Bond Mutual Fund?](https://money.com/img/logo-social.png)

Bond funds are a fine choice for most investors, but [individual bond](https://money.com/what-is-a-bond/)s have one advantage funds can’t match.

As with stock [mutual funds](https://money.com/collection-post/what-is-a-mutual-fund/), bond funds allow you to instantly get a diverse portfolio of bonds with a small initial outlay. This is especially important if you are buying corporate or international bonds, since you may face high minimum purchases on each bond. For a very low cost—about 0.2% or less of assets per year—you can buy a [bond index fund](https://money.com/collection-post/what-are-index-funds/) that gives you exposure to the entire U.S. bond market, with a mix of government and corporate bonds.

Individual bonds do have one advantage over most funds, though. If you want to be certain of getting back your money at a specific date, you can hold a U.S. Treasury bond to maturity. (Unlike with corporate bonds, diversification isn’t an issue. All Treasuries are backed by the U.S. government, and the feds have never defaulted.) Funds, which own a constantly changing mix of bonds, don’t have this feature. “If you own a bond fund, there is no maturity,” says investment strategist Pat Dorsey of Sanibel Captiva. The returns of a bond fund will fluctuate along with the current market value of the bonds in the portfolio.

The safety of holding a bond until maturity is often overstated, however. If you buy a Treasury and then interest rates rise, its market value if you tried to sell it will still fall, just like it would inside a mutual fund. The difference is that you aren’t getting an annual fund statement telling you so.

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