Such a portfolio will have some of the attributes you describe, but may not do quite what you're hoping for.
We can see the hypothetical portfolio you looked at
here (set the slider on the page to five
years to get the five year ladder).
The YTM and YTW figures don't take expenses into account, so the actual yields are about 1/3% lower than stated (ER of 0.24% for investment grade, 0.43% for HY). In addition, what you can expect is YTW or SEC yield, not YTM. When I go to the page and use 2018 as a start, 5 year equally weighted portfolio, I see YTW of 3.37%. Subtract off the 1/3% ER and that gives 3.04%, or about the same as the SEC yield of 3.10%, as one would expect.
The fund determines the "effective maturity" of callable bonds by estimating when it expects the bonds to be called (per prospectus). In a rising interest rate environment, the bonds become less likely to get called, which might create some principal risk at fund maturity (as the bonds haven't "matured", i.e. gotten called, as expected). I believe this is implicit in the prospectus' listing of "extension risk".
There's cash drag. Again as the prospectus states under "declining yield risk", in the final year, the fund gradually converts to cash as the bonds mature any time during that year. Stated yields generally assume you can reinvest cash at the rate you were receiving, but these funds sit on cash in their final year.
This portfolio also has a lot more credit risk than your typical core plus (investment grade plus some junk) fund. If I change the IG:HY mix to 80/20, the YTW drops to 2.70% (or 2.45% after subtracting 0.25% in expenses), and the SEC yield becomes 2.44%.
Personally, I'd be happier with a fund like BCOIX, where I'd be trading a bit of that price stability for a managed portfolio (at no higher cost) that can "go with the flow" (deal with bonds getting called early or late) and not sit on cash. Also, even though it's a core "plus (junk)" fund, it takes on a lot less credit risk. Long term it should do fine even with potentially greater price fluctuations.
A shorter term alternative might be something like DBLSX. At 0.43% ER, it's also not too expensive, and with a 1.25 year duration, it may hold up well against interest rate risk (though I'm always suspicious of duration figures for mortgage backed bonds).
Bullet funds are best for implementing a bullet investment strategy (where you want a specific maturity date for an anticipated need, such as a home downpayment).
http://www.municipalbonds.com/investing-strategies/bond-investment-strategies-ladders-barbells-and-bullets/A bullet ladder will do some of what you want, but if you'll pardon the pun, it's no magic bullet. Some risks are reduced, others increased. IMHO not a big impact for long term investing in bonds, but this ladder might be better for you if your horizon is shorter term.
