1. What is the main difference between bond funds and individual bonds?
Individual bonds have a fixed maturity and return principal at maturity, while bond funds are diversified portfolios without a fixed maturity date.
2. Are bond funds safer than individual bonds?
Bond funds reduce issuer-specific risk through diversification but still fluctuate with interest rates and market conditions.
3. Which is better during falling interest rates?
Bond funds may benefit more from price appreciation across multiple holdings when rates decline.
4. Can I lose money in individual bonds?
Yes, if sold before maturity during rising rates or if the issuer defaults, losses are possible.
5. Should I combine bond funds and individual bonds?
Many investors use both funds for diversification and individual bonds for predictable income and maturity planning.