Last week, Motley Fool Money featured an excellent segment about buying bonds. Alison Southwick and Robert Brocamp discuss bond-related terminology, such as the coupon and par value. They also discuss bond ratings and the pros and cons of buying a bond fund versus buying bonds individually. The segment begins at the 8:30 mark.
Something I did not know about until I heard it here: target date bond funds are a thing
,although there aren't many of them. As with other bond funds, you get the benefits of diversification. Because it's a target date fund, you know you'll when you get your return.
Brokamp specifically mentioned the iShares iBonds Dec 2026 Term Corporate ETF (ticker symbol: IBDR) . All of the bonds in this fund will reach maturity between January 1, 2026 and December 15, 2026. The average yield to maturity is 5.04%. As Brokamp explained, if you buy now and hold this fund until 2026, you'll earn a 5% yield for the next 3 or so years.
Fidelity, iShares, and Invesco offer several target maturity funds, some of which have targets that extend into the early 2030s. Use FINRA's Fund Analyzer to find these funds and see how fees might affect your return.