focus on income in VP?

[Kbg]

I am still wrapping my head around the difference between owning the bonds outright to maturity where you get face value+coupon vs an ETF/fund of bonds where its more of a speculation that should have a similar net return but with varying interest/price depending on when sold?

This is fairly straight forward. "Funds" have a mandate and in the case of bond funds the mandate is usually focused on bond type and bond duration which you can almost always read in the fund's name. (e.g. ETF Symbol VGIT = Vanguard Intermediate Term Treasury Fund). Using VGIT as our example "intermediate" is normally defined as 7-10 years and treasuries are the bond type.

Accordingly, the bond fund's quoted price will vary based on supply/demand and interest rate movements for equivalent class bonds as new bonds in the class continue to be (newly) issued and all old bonds in the same class will immediately reprice to the new issue. You'll be able to see this in the daily quotes with ETFs being updated continuously throughout the trading day. Given a fund is purchasing and selling bonds continuously to stay within the mandate you end up with an average of sorts for the bonds in the fund's portfolio which then becomes the fund's "yield."

***IF*** you hold a bond to maturity then in nominal terms you get the coupon interest returned to you on the bond's distribution date and your principal back when the bond expires. In other words, there is zero doubt as to your nominal return and it "never" varies.

If you try to sell your individual bond before maturity then the same things impacting bond funds impact your bond only precisely so and it too will be constantly repriced on a daily basis in the secondary market.

Notionally, if you owned a bond right in the middle of a fund's "average" the "yield" should be reasonably close at a given point in time should you hold both until the bond expired (or more aligned to reality, you sold your bond when the fund sold its bond of the same type...as it will when the bond exits the fund's mandate duration).

At the 2% level it's way more complex, but the above covers 98% of the difference.

My personal approach. I buy individual treasuries (bills) for specific outlays I know are going to happen at a specific point in the future which is what large pensions (and others do). If I just want to collect interest I tend to go with funds as I know I can cash out efficiently with the click of a button. I could do this buying individual bonds on the secondary market but I figure between human mistakes, being a small DIY investor getting screwed on the spread vs. the fund's management fee that it's probably a draw and takes far less of my time which is worth something.