bonds vs. bond funds

You may hear sometimes that purchasing a ladder of bonds is better than purchasing a bond fund. A ladder of bonds just means you buy say 5-10 different bonds with various maturity dates. When each bond matures (assuming the issuer doesn't default), you get paid the principal amount of that particular bond. If you plan on spending the payments received upon each bond's maturity then you have a 'non-rolling ladder' bond portfolio. If you plan to reinvest the maturity payment into another bond, then you have a 'rolling ladder' bond portfolio. Since bond funds reinvest the maturity payments received from their maturing bonds, a passively managed bond fund is largely equivalent to a rolling ladder. Except a bond fund provides better diversification and lower transaction costs than you can achieve by constructing your own rolling ladder. But to realize the lower costs of a fund, you have to pick one that is passively managed with a low expense ratio.

Although comparing an individual bond or a non-rolling ladder to a bond fund is like comparing apples to oranges, folks sometimes think a non-rolling ladder provides more certainty and/or less risk because one can ostensibly predict the future payments to be received. However, this perceived attribute isn't real when you account for opportunity costs.

Additional resources:
https://advisors.vanguard.com/iwe/pdf/ICRTBF.pdf