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Individual vs Bond funds?

Is it time to sell high yield bond funds and invest in individual bonds?
As of today, the US Bond Index is down 1.5%.

I'll pass on bonds.

BTW, there will be folks who defend individual bonds.

Ask them what happened to the Lehman Bonds.

They weren't the only folks who defaulted.

There is more risk than Income oriented investors want to admit.

Until that risk comes home to roost.
I manage a muni and a corporate bond ladder. I love the predictability of them and the stability they provide for my portfolio as I near my retirement date. Are they risk free? Nothing with any return ever is. Default rates on high grade investment bonds are under .5 % and really closer to .1% for shorter duration. If you want to really dial in your fixed income
Over nearly forty years there were several periods I did well with a portion of my portfolio long in high yield bonds. However, as I grew my dividend payers into a well diversified, secure source of income the High Yield market had less and less appeal for me. First, HY is too highly correlated to the equity markets providing no risk balancing. Second, HY tends to tank harder than aristocrats and blue chips in true bear markets. More directly to the question, I always invested in corporates and municipals via funds and ETFs. My feeling was the challenge in evaluating bonds was beyond my resource and competence. I wanted the diversification that a basket provided and I don't consider 10 or 20 bonds sufficiently diverse. I have laddered CDs because of the guarantees associated with them, and would consider individual Treasuries as well but even there I tend to stick to baskets. By the way, we are talking about a seven figure plus portfolio.
I think the first question is "why do you want bonds in your portfolio?"
If the answer is a diversification "away" from equities, then you should focus on treasuries as high yield and most investment grade bonds show a high correlation with stocks (I'm guessing you already know this).
The next question(s) are the when and why would you need the funds allocated to the bond side?
If the answer to the first is just to hedge against market downturns (lower portfolio risk) and you don't need immediate access to the bond money, then I would go with funds.  Adjust the duration to suit your needs.  Currently, shorter is better in a rising rate environment.  The rising interest rates and holding for specified fund duration will get you your money back.
Otherwise, the ladder is a good choice as every specified time period you will cash out a bond and either use it for living expenses or roll it into a hopefully higher yield bond.
Neither method will keep up with inflation the way a quality equity will.
For the record, I am 70/30.  80% of the 70 is in dividend paying stocks (domestic and international.  The other 20% is growth ETFs and some inflation related ETFs.  Our bond side is 66% treasury funds/ETFs with 33% a variety of every other type out there.  I shoot for 1-2% cash.
I guess the last question is what will be your reaction to a 2008-9 crash?  Our dividend stocks raised their dividends during that time frame and the bond side lost very little....so I yawned and went back to playing with the grand kids.
If you choose to continue investing in the "High-Yield Bond" asset-class (whether it's a good idea to invest in that asset-class or not is a separate question altogether and I'm assuming that your answer for that is a resounding YES!), then the key advantage of going thru' a Fund vs. individual is the reduction in credit risk by diversification into multiple issuer. With individual HY bonds, your principal is tied into a smaller number of companies with risky credit-worthiness. Defaults are more likely in the HY space. Since a single default will significantly affect the return from your overall Bonds, you have higher risk. The flip-side is that, if you can spot issuers that you believe will do okay with their Bond obligations, you will likely find better risk-adjusted opportunities with individual Bonds.

If the rising rate environment is causing you to rethink a shift from fund, then you may consider target-maturity Bond funds (e.g. Bulletshare HY target-maturity Bond ETFs https://www.invesco.com/us-etf/en/fixed-income.html )

If rising risk of default is causing you to rethink a shift from fund, then you may consider the better-managed Bond funds that invest in higher-tier of HY bonds (not passive funds), and that have proven track record of being managed by seasoned managers who analyze credit-risk much better than casual investors like us.

Speaking for myself - I recently sold my HY passive funds (FALN, SHYG, Vanguard's junk-bond fund, etc.). I already had a reasonable amount of individual HY Bonds for which I did research on the issuing companies to get comfortable, and my combined High-Yield investments (that includes junk-bond, MLP, BDC, etc.) went above my % allocation threshold. I sold those funds not because they were bad investments in their own merit, but because they turned out to be the least attractive ones across all my other "high-yield" holdings.

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