https://money.usnews.com/investing/bonds/articles/how-bonds-can-calm-anxious-investors?src=usn_invested_nlDec. 26, 2018
Investors overwhelmed by the vast array of bonds available today have a simple solution: buy a fund. Managed bond funds leave the hard work to professional managers, and index bond funds, like their stock-owning counterparts, simply buy the bonds in an underlying index.
But standard bond funds don't allow the investor to simply wait out down periods as one can do with stock funds and individual bonds that can be held to maturity. If bond prices are down when you need your money, you could wipe out years of interest earnings.
A few fund companies have tackled this problem with target maturity exchange-traded funds designed to return the investor's principal on a given date, like an individual bond does, while also getting the diversification offered by a fund with many holdings.
Typically, these funds purchase individual bonds that will mature around the target date. Invesco, for instance, offers a series of Bulletshares government and emerging market bond ETFs maturing every year from 2018 to 2028.
"Target-mutual funds can serve as havens for anyone with a due date," says Mark J. Grant, chief global strategist with B Riley FBR and B Riley Wealth in Fort Lauderdale, Florida. "This would be especially true for people going to college or buying a house, or retirees that are looking at lifestyle changes."
Michael K. Creamer, principal at Glass Jacobson, a wealth advisory firm in Rockville, Maryland, notes that bond investors currently face the risk of losing money as interest rates rise, a risk target-maturity funds can address.
"Target-maturity bond funds are an excellent way to manage interest rate risk," he says. "They also provide instant diversification, professional expertise and risk management." – Jeff Brown
