Bonds
Diversify Your Income Streams
What Are Bonds?
The Steady Side of Your Portfolio
Fixed income is the part of a portfolio meant to provide stability and income. When you buy a bond, you lend money to a company or government. In return you collect interest along the way and get your principal back when the bond matures. Bond funds and individual bonds can both fill that role, but they work very differently.
Direct Bonds vs. Bond Funds
Know the difference
Most investors only ever own bonds through a fund. We are one of the few investment firms that also offer direct, individual bonds. Neither one is better across the board. Each has strengths and trade-offs, and we use both depending on what we are trying to accomplish for you.
Bond ETFs and Bond Funds
Hundreds or thousands of bonds held inside one fund that trades like a stock.
Strengths
- Easy to buy and sell on any trading day
- Broad diversification across many issuers
- Low annual expense ratios on many index funds
Trade-offs
- No maturity date, so the price keeps moving with interest rates
- Value can fall when rates rise or stocks fall
- Income changes as the fund’s holdings change
Individual Bonds Held to Maturity
A smaller group of bonds you own directly and hold until they mature, collecting interest along the way.
Strengths
- Known interest payments and maturity dates
- Face value returned at maturity, with bond issuers tactically selected and managed to help avoid default risk
- Price swings matter less if you hold to the end
Trade-offs
- Less diversified, so each issuer’s credit matters more
- Selling early can mean a loss and wider trading costs
- Interest is generally taxed each year
Side by side
How They Compare
| Bond ETFs & Bond Funds | Individual Bonds Held to Maturity | |
|---|---|---|
| Daily liquidity | Yes | Partly. You can sell, at market price |
| Known income and maturity date | No | Yes |
| Protection from market losses | No | Partly, if held to maturity |
| Low interest-rate risk | No. There is no maturity date | Partly. Face value is returned at maturity |
| Diversification across many issuers | Yes | Partly. A smaller group of issuers |
| Low or no annual fees | Yes. Low expense ratios on many funds | Partly. Trading markups apply |
How We Build a Direct Bond Portfolio
What you actually own
When we use direct bonds, you own the individual bonds in your account. You can see each company, each interest payment and each maturity date.
- Quality issuers. Primarily investment-grade corporate bonds from large, established companies.
- Attractive coupons. We look for bonds that pay meaningful interest. The portfolio’s average coupon was recently about 5%.
- Shorter maturities. Most bonds mature within the next several years, with an average recently under four years. Shorter maturities are generally less sensitive to interest rate changes.
- Diversified. Your money is split across many different companies and industries, so no single issuer carries the plan.
- Actively managed. Issuers are selected and monitored using credit, yield curve and sector analysis.
Examples of Recent Issuers
- Bank of America
- Southern California Edison
- Dollar Tree
- ONEOK
- Amgen
- Devon Energy
- CVS Health
- Ford Motor Company
- Citigroup
- Dow Chemical
Holdings and portfolio characteristics as of 10/31/2026. They change over time and are shown as examples only, not as a recommendation to buy or sell any security.
Your Questions, Answered
What is the difference between a bond and a bond fund?
A bond is a single loan to one issuer with a set interest rate and a set maturity date. A bond fund is a pool of many bonds with no maturity date of its own, so its price and income keep changing.
Can I lose money in bonds?
Yes. Bond prices generally fall when interest rates rise, and an issuer can default. If you hold a quality individual bond to maturity, you are scheduled to receive its face value back, but bonds sold before maturity may be worth more or less than you paid.
What if I need money before a bond matures?
You can sell an individual bond before it matures, but the price depends on the market that day and trading costs can be wider. That is one reason we often pair direct bonds with bond funds, which are easier to sell on any trading day.
Which is better, direct bonds or bond funds?
It depends on the job. Bond funds offer daily liquidity and broad diversification. Individual bonds offer known income and maturity dates. We use each one for what it does best.
How is bond interest taxed?
Outside of a retirement account, bond interest is generally taxed each year. We look at which accounts hold your bonds as part of your overall tax plan.
Is Your Fixed Income Doing Its Job?
Let’s review what you own today and whether direct bonds, bond funds or a mix of both fits your plan.
Bonds and bond funds are subject to interest rate, credit, inflation, liquidity and call risk. Bond prices generally fall when interest rates rise, and bonds sold before maturity may be worth more or less than their original cost. Diversification does not guarantee a profit or protect against loss.