 Why is this important? Because when an investor buys an individual bond, they're guaranteed a fixed rate of interest for the life of the bond. And when the bond matures, they're guaranteed their principal back, assuming there has been no defaults. With that assumption, an investor knows exactly what they're going to earn on the bond that they hold to maturity. Bond mutual funds don't pay a fixed rate of interest. As a matter of fact, the interest that they pay fluctuates.