Questions about individual bonds

[disneysteve]

We have a bond mutual fund (Vanguard Total Bond Market Index) but have never invested in individual bonds. I know that as long as the issuer doesn't default, an individual bond can't lose value if held to maturity while a bond fund can fluctuate in value based on market conditions and the fund's holdings. We're at a stage of our lives where our investable assets are larger and we could afford to purchase a diversified group of bonds and I'm wondering if it isn't time to start doing so. I know Suze Orman always advises against bond funds but this has been one area thus far where I haven't followed her advice. With a relatively small amount to invest, it has always seemed to me that a bond fund was the way to go.

For those of you who invest in individual bonds, tell me what you own or have owned, how you chose them, how/where you purchased them and any tips or advice you'd have. I'm interested in hearing it all, good or bad, about government, municipal and corporate issues.

[KTP]

Let me know what you find out too Steve. I just recently set up a Vanguard account with $50,000 to get my foot in the water with municipal bonds. I invested in the intermediate term bond fund which has an expense ratio of 0.20% (0.12% if you invest 100k). I *think* it is a reasonable investment with fairly low risk, but I don't like the idea of losing principal.

What are you thinking a person would have to invest in individual muni bonds to make it worth the time and trouble to get a reasonably diversified portfolio? $200,000? more? less?

I want to keep the muni portion of our investments at about 30%

[Broken Arrow]

Well, I finally bought Walmart bonds. I've been harping about them for a while, but due to timing situations, I didn't actually get around to it until just recently. So, I can't say that I have much experience to offer. Perhaps others can help out more.

Until then, I bought $10k worth of Walmart bonds through Scottrade. $10k is the minimum balance requirement to make a buy there. However, there are no trading fees or expense ratios after that. Not for individual bonds anyway.

I did notice one thing though. The bonds are separated into different lots, and the lots do have different costs (and yields and maturity dates). So, not all bonds, even Wal-mart bonds, cost the same.

For example, the ones I bought were $108 a piece. Therefore, the real cost to my lot was $10,800.

Once bought, these pay their interest semi-annually, but I've seen ones that pay annually and even monthly (for risky short-term ones).

I'd check more for details, but Scottrade's website appears to be down right now.

I know you guys know this, so this is for other readers: Like anything else, individual bonds seem to have its pros and cons as well. Before buying, I would make sure that this is an asset class that will suit your intended time frame and will not throw your asset allocation out of whack.