Here is a basic checklist to see if it will be to your advantage to invest in bonds.
Yes, if you have at least $100,000 to invest. It takes bonds from at least 10 issuers to create a diversified portfolio. However, to get decent pricing, you’ll need to buy them in blocks of 10 or more. Since bonds are typically issued in $1,000 increments, that means you’ll need at least $100,000 just for the fixed-income portion of your portfolio. Anything less and you’re better off sticking with a fund.
Yes, if you want a steady stream of income. Say you’re a retiree who needs to generate $5,000 a month. You could go with a bond fund that currently yields enough to produce that payout. But over time, as the manager sells current holdings and buys new ones, the portfolio’s average yield will sway – and could fall short of your target. With individual bonds you can lock in precise payments for a definite length of time.
Yes, if you’re investing for a specific period. Unlike funds, individual bonds mature on a given date. This makes them ideal if you know you’ll need a set amount of money at some point in the future – say, for your kid’s college education.