Bond Funds Investing

The same principles apply to bond funds investing that apply to stock index funds - its an easy and low-cost way to diversify. Without an index fund, you would have to buy individual bonds and expose yourself to extra risk. You would also need to do research on the entity, any related entities, and any related information. For example, if you were going to buy a General Electric bond, you would need to research General Electric, any competing companies, and the areas of business with which GE does business. Thats just about all of US business! Do you want to spend many hours just to make sure you buy the right bond with a good chance you'll be wrong no matter how much research you do? I know I don't.

There are definitely good bond bargains out there somewhere at any time, but its probably not worth your time and effort to find them. However, if you enjoy the research process, then perhaps it is worth it to you. But be sure that you won't just enjoy the process for the first month and then get bored. That's a recipe for disaster. You need to devote significant time regularly.

I use a Vanguard's Total Bond Market Index Fund to invest in bonds. Vanguard is easy to use and customer support is friendly and quick. They also make it easy to set up automatic investments on a regular basis. Most importantly, they tend to be the lowest cost fund provider.

Be aware of trying to get too creative with your bond investments. I've been tempted by the more complex or specific bonds that seem to have a higher chance for gains. However, buying specific bonds would require me to stay current on related issues - which goes against the basics of investing. What if I interpret those issues wrong and end up doing worse while wasting my valuable time?

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