Individual Bonds

Bond Mutual Funds

Closed-End Bond Fund

Bond UITs

Bond ETFs

Return of Principle

Principal returned
at maturity or when
bond is called
Principal at risk Principal at risk Receive principal
back as bonds
mature or are called
Principal at risk

Maturity Rate

Set Maturity Date None None Liquidated on Set date None

Income Payments

Usually fixed and
paid semiannually
(except zero-coupon
bonds)
Fluctuating monthly
payments
Fluctuating monthly
or quarterly
payments
Fixed monthly, quarterly,
or semiannual
payments
Fluctuating monthly
payments

Liquidity

Trade on secondary
market above or
below face value,
some can be hard
to sell
Bought and sold at
net asset value
Trade on an
exchange with daily
fluctuation in the
unit price
Bought and sold at
NAV
Trade on an
exchange with daily
fluctuation in the
unit price

Redeemable

Redeemable only at
maturity or when
called
By selling shares at
prevailing NAV
By selling shares at
prevailing unit price
By selling shares at
NAV
By selling shares at
prevailing unit price

Default Risk

Varies by credit
quality of bond
Limited by
diversification
Limited by
diversification
Limited by
diversification
Limited by
diversification

Interest Rate Risk

Exists but declines
as bonds near
maturity
Exists and sensitivity
to interest rates
depends on
portfolio of
holdings
Some closed-end
funds are highly
leveraged, they can
be very sensitive
to interest rate
increases
Exists and sensitivity
to interest rates
depends on
portfolio of
holdings
Exists and sensitivity
to interest rates
depends on
portfolio of
holdings

Expenses

No ongoing expenses;
transaction
charge built into
price for purchases
and sales
Annual fees; may
have front or backend
sales charge
Annual fees
and brokerage
commissions
Annual fees (usually
lower than mutual
fund fees) and
front-end sales
charge
Annual fees
(usually lower than
mutual fund fees)
and brokerage
commissions

Reinvestment

No automatic
reinvestment option
Automatic
reinvestment option
Automatic
reinvestment option
Automatic
reinvestment option
Automatic
reinvestment option
available for most

Professionally Managed

No Actively Managed Passively Managed   Passively and
Actively Managed

Diversification

Need to purchase
multiple bonds to
diversify
Constantly changing
portfolio of bonds
Constantly changing
portfolio of bonds
Fixed portfolio
of bonds; less
diversified than
many bond mutual
funds, closed-end
funds or ETFs
Constantly changing
portfolio of bonds