Recommend this page to a friend. Our panel of experts answers your mutual fund questions. Now that bond yields are more than 7 percent, investors may wonder if it is better to own individual bonds or mutual funds.
Bonds offer several advantages.
They usually cost less than the typical fund, and you get your principal back at maturity, unless the issuer defaults. You have greater control over your tax situation. You can offset losses against gains and avoid paying taxes on any profits. However, bonds pay interest income only once every six months. On the other hand, bond funds give you professional management, monthly income, and a potentially higher return.