If by "safe" you mean "low risk", most bonds are safer than mutual funds which usually contain a mix of stocks, bonds, and other investments. Since both bonds and mutual funds have varying degrees of risk, some low-risk mutual funds will be safer than high-risk bonds. Bonds issued by the U.S. government are commonly known as "risk-free", since the U.S. is a sure creditor. Bonds issued by other municipalities have a slightly higher risk -- every once in a while a local municipality will go bankrupt. Bonds issued by other entities, such as corporations, have varying degrees of risk. Even though bonds (even U.S. bonds) may be low risk, inflation can severly reduce the actual return on any fixed-income bond. You can get inflation-adjusted bonds to provide for greater certainty. Mutual funds are composites of different investments. They too have varying degrees of risk according to the assets owned by the fund. The benefit of a mutual fund is the diversification it provides to mitigate the (often differing) risks involved in its diverse investments.

The typical bond will go up and down in value less than a typical stock. However, when you refer to mutual funds, it's important to know that there are different kinds of mutual funds. There are stock funds, which have almost all stocks. Owning shares of one of these is less risky than owning an individual stock for a few reasons: 1. The fund owns a portfolio of dozens of stocks, so the chance your investment will lose all its value is like the chance of every horse falling down in the same race. 2. Professional managers pick the stocks to buy and sell, meaning you don't have to rely on your own research. In my case, researching what to buy and when to sell it would be an amateurish guess, so I leave it up to the pros. There are bond funds also. These are not invested in the stock market and therefore less risky because the typical bond is less volatile than the typical stock. Owning shares of a bond fund is less risky than owning an individual bond because, like a stock fund, the risk is spread out across many different investments and it's extremely unlikely that they will all go bad. One noteworthy thing about bonds is the question of tax-exempt status. The monthly dividends paid by most municipal government bonds are exempt from federal income tax. That can be a rather attractive feature, as you can imagine. The two things that eat up your return on any investment are inflation and taxes, and that takes one of them out of the picture.

You can also invest in a bond fund which is a mutual fund that holds any number and types of bonds inside which helps to further reduce risk (not eliminate).

Definitely oughtta "cost average" and go w/ "bond funds"! ;-)

Long and intermediate term bond fund values will fall as interest rates rise. Long term bonds are ok if you hold them to maturity but if interest rates hit 8 percent you will not be happy holding a 3.5 percent bond. Bonds are safer Short term bond funds: In a rising interest rate environment you want to keep your duration on your bonds as short as possible. My recommendations on these funds are as follows: Janus Short-Term Bond fund symbol JASBX. This fund has never lost money in a given year. Year to date from Jan 1, 2009 to September 30, 2009 this fund was up 7.37% http://hubpages.com/hub/highbond

No. Long term equalls more risk. The interest rates will be flucuating. Also the shorter the time for bonds, the better.