[baskethead]

NEVER EVER buy bond funds or bond ETFs. In an increasing interest rate environment like this, you will suffer terrible losses when the fund buys and sells positions. If you want, buy bonds outright, like US treasuries or commercial paper of reliable companies. Also stick with short-dated paper until we get to a peak in interest rates. The Fed has already said they will keep raising rates so we know rates will keep climbing for a while.

[ctchocula]

This is overblown, because there are cases where you do want bond funds and bond ETFs. Was just reading this article today [1], which presents some of their benefits.

- More convenient than individual bonds.

- Can't estimate future liabilities perfectly and therefore won't be able to perfectly duration match using individual bonds.

- If we hit a recession and interest rates drop, you'll get a nice price bump from your bond funds when your stocks are dropping.

That being said, I do agree that the dangers and risk of bond funds and ETFs don't get talked about often enough, and that you should know what you're doing before buying them. If you have a short-term need for the money (e.g. need 100k for downpayment in 12 months' time), you should not buy a bond fund with a duration longer than 12 months. That is when you will hit the danger parent brought up where you will get a NAV drop and won't have enough money at the end of 12 months to meet your liabilities. In that case, you should really duration match [2] with individual bond that matures in 12 months.

[1] https://occaminvesting.co.uk/against-duration-matching/

[2] https://occaminvesting.co.uk/duration-matching-an-introducti...

[thunky]

> NEVER EVER buy bond funds or bond ETFs.

This is bad advice to give generally.

Yes there are tradeoffs but that doesn't make them bad investments.

As rates rise, the bond fund is buying new bonds with higher yields, so the fund owner makes up for NAV losses as long as they hold it long enough to match the fund duration.

[baskethead]

No. As rates rise, when you sell your lower yielding stocks you are selling low and buying high, iteratively. Rising rate environments like we are in right now are a disaster for any bond etf that doesn't have short duration. You need to wait until interest rates have peaked or at least eased off.

[thunky]

You seem to be only concerned with the price of the fund while ignoring the yield. You have to look at the total return.

Yes you're selling lower yielding bonds but like I said your replacing them with higher yielding ones, which contributes to your total return. This is true for short and long term funds. The key is to buy a bond fund with a duration that matches your planned holding time.