Bond funds are weird to me because you cannot hold to maturity to realize yield-to-maturity. The only point to them is to get coupon payments. Is your bond fund total return or, if not, what do you do with the coupon payments? To me, it just seems better to buy outright mix of 2yr and 10yr US treasuries and always hold to maturity.
which is fine, but you're just adding administrative burden on yourself.
The bond fund is doing exactly what you're trying to achieve, except that they reinvest the bond capital back into new bonds when they mature. You get the coupon payment as income, and you sell the bond fund when you want capital back.
The price of the bond fund is a reflection of the value of the bond at market prices - exactly as if you would yourself, if you held the bond directly, and wanted to sell before maturity.
You might eek out a tiny bit of efficiency due to lack of fund fees you pay, if you held bonds yourself - but then the administrative burden you have to do yourself is going to cost just the same imho (via time taken for example).
Everything you mention is correct, I just wanted to add that holding bonds directly makes sense in the case when you have a date in mind for when you will need the invested money. So for instance if you plan to buy a car in 2 years buying bonds that mature in 2 years has the nice property of being worth a guaranteed amount of money exactly at the point you need those savings. There are etf equivalents known as “bullet shares” but these have an expense ratio that isn’t incurred with owning bonds directly.
