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Bond Funds do, however, give investors low-cost easy access to the fixed income asset class. Fund Managers and Fund Families can provide investors with a great deal of expertise. Bond Funds, though they do not have guaranteed returns or payment streams, can be found to fit all types of risk preferences and risk aversions.
Access to individual Bonds, though improving, can be difficult and expensive. Many types of Bonds require large initial investments. Bond Funds can be purchased for a few thousand rupees; furthermore, Bond Funds give investors easy diversification within the target asset class.
Bond funds also give you choices. You can choose to invest in Corporate bonds, Government Securities etc. So, which to choose? Bond Funds are probably the right choice for investors who only wish to obtain diversification. It is difficult, if not impossible, to obtain any realistic diversification with just a few thousand rupees in individual bonds. Government of India bonds, which are credit risk-free and can be purchased are a notable exception.
Investors with more funds at their disposal might want to purchase individual bonds with varying credit classes, characteristics and maturities.
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