Frank - With a bond as with any investment, I try to write down the risks.
Not all risks are equal, you have to look at the risk, the cost if it comes to pass, and the chances it will happen.
Like what is the risk if you loan me money to buy a house. Risks include I may not pay back the loan (loss of principal). You would be able to look to my credit rating and make a judgement on the chances it would happen. If it did happen, your loss would be impacted by being able to forclose on the loan and sell the house. If I put down 30% of the value, you don't have much at risk as long as the value doesn't decline too much. You could sell for 80% of the value and get your money back.
Another risk is inflation risk. Say that you loan me the money at say 4% and inflation goes up in 2 years to 6%. The money I pay back would be worh less than the money you loaned me. That is the purchasing power would be less. You would loose some purchasing power but you would still get your money back so not a great loss like not getting the money back.
Still one more is interest rate risk. If you loan me at 4% and rates go to 6%. Then if you have to sell the loan, you would get less than face value. Again not a great risk, you would loose some if you had to sell but not your entire investment. You can run the numbers, if you loan me $100,000 at 4% you would get 4,000 in simple interest. If rates go to 6% and you had to sell, you would get only about $67K (4,000 interest / rate of .06).
So if you want to invest in a bond fund, check out the risks. Look at the credit rating of the bonds they buy (like my credit report). All major funds will list this or you can get it from morningstar.com for easy compare. Look at the risks of rates going up but looking for an item called duration. Shorter terms are less exposed to interest rates going up. Duration is a way to measure the amount of loss the fund would incur if rates go up or down. I would also look for the risks associated with the fund company it self, and the person running the fund. How long have they been doing this kind of thing, what is the track record. Finally, check our that the costs are. The funds list this as a percentage. Lower cost means you get to keep more of your puny returns. With rates so so, a fund that takes 1% might eat up 1/3 or more of your return.