Bonds vs. Bond Funds: Does Holding to Maturity Actually Protect You?

Are individual bonds safer than bond funds? After my last video on cash versus bonds, a lot of you pushed back with the same argument: with an individual bond or a bond ladder you can hold to maturity and get your money back, and a bond fund can't do that.

In this video I put that idea to the test with real numbers. I start with the one thing we have to understand first, the difference between a bond's maturity and its duration. Duration is what tells us how much a bond or a bond fund moves when interest rates change.

Then I look at how the funds actually did. Vanguard's Total Bond Market (BND) and an iShares 7-10 year Treasury ETF both got hit hard in 2022.

Next we look at a single 10-year Treasury from the start of 2022, the kind you can hold to maturity, and track what really happened to it once you factor in inflation.

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0:00 Why I'm revisiting bonds vs. bond funds
1:27 Maturity vs. duration, explained simply
2:57 How much a bond moves when rates change
4:14 How the bond funds actually did (BND & iShares)
7:00 Buying one 10-year Treasury and holding to maturity
10:37 What inflation does to your "guaranteed" money back
14:00 Does a rolling bond ladder change anything?
17:05 When individual bonds, ladders, and funds each fit
19:34 My bottom line

ABOUT ME

While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. I've since sold my websites, bought them back, and started a new website and this YouTube channel.

I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (https://amzn.to/3by10EE)

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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.

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