By buying individual bonds, you also have reinvestment risk and/or the risk that you have to sell a bond early, perhaps at a lower price than you paid for it. You also have the inconvenience of managing the bond portfolio and the added difficulty of rebalancing.I agree with your points on default risk, and that is why, on the question of “bonds v cash” ( and I am including in “cash” MMFs), the only bonds I would consider to be a reasonable substitute for cash are Treasuries (assuming held to maturity). I would consider individual corporate bonds, as well as almost any bond fund, including any intermediate bond fund, to be part of a risk portfolio and an alternative (for diversification purposes) to stocks, not an alternative to cash.
+1
However, if one chooses to buy an actual commercial bonds over a fund, they add default risk to their holdings. By the nature to the pooling a fund does, this risk is de-minimis in a fund.
Statistics: Posted by rkhusky — Sun Dec 08, 2024 7:32 am — Replies 142 — Views 7776