Before we can answer the question: "If you invest in individual bonds or bond investments
Money, "we must first understand its holdings of bond portfolio purposes. Novice
Investors as a source of income bonds, based on income to supplement your living expenses
During retirement. Institutional investors and qualified consultants, compared to that
Bonds as a tool to reduce portfolio volatility. Total return, rather than bond yields is feasible. If the holders of bonds aimed at controlling investment risk, and then in bond funds rather than individual bonds, this is the right choice.
Individual behavior is not cheap bonds. Corporate bonds may be costs 1 million or more.
Therefore, if a 100 million retirement decided to allocate 40% of the bond portfolio
(400,000 U.S. dollars), which is likely to get at least 40 different locations to achieve
At the same time bond portfolio diversification. The increase in the cost of acquisition of individual
Bonds may prevent different themes, many investors enough diversification.
In contrast, bond funds may have only 1,000 initial investment cost depends on the $ 3,000
If you buy into the retirement account or not. Because bond funds head, you can own the stock
Tens of thousands, even hundreds of thousands of bonds to buy. Such as Pioneer
Short-term Bond Index (VBISX). If you have an individual retirement account, you can stand up to 642 different bonds
1,000 U.S. dollars fund investment with the purchase of the 40 projects from far away
The previous example.
Cost
Although individual bonds do not bear the daily management of the debt and operating costs
Funds, are associated, including the brokerage commission or fee and supply and demand), all investors should consider the cost. In addition, (like most of us), small retail investors, the price offer (commissions and bid / offer spread) and institutional investors. The
Transaction costs of individual bonds is very difficult to identify and commission
Has never been disclosed. If you really have an institutional investor profits, making the sex
In the market, the bond market.
When you buy a bond fund, you know what the costs are: the ratio of transaction costs and expenses. Some bond funds to provide low-cost, including a small pioneer
Bond Index as our above discussion of the annual cost of only 0. 20%.
Safe
Many investors the impression that a lower risk of debt compromise. This is a myth, it leads to a false sense of security. In fact, bonds, whether corporate or treasury rates and credit conditions in response to daily changes. Individual bond investors may have known that the end of the period expires, the main will return to comfort. However, in maturity, your principal will fluctuate. Due to rising interest rates, the main link will decline (because the bonds less and less attractive to new investors). If individual property owners that the bonds were forced to sell the position before the due date, you may be able to interest rates in a period of loss.
Bond funds are much more liquid. Of course, no fixed term bond funds (ie,
Mainly guarantee or income). However, fund managers continue to trade
Bond portfolio to maximize interest income and capital gains.
In addition, if you only have a bond portfolio of 40, after one or two
By default, it can be a serious obstacle in his day. In contrast, because the bond funds
Hundreds of bonds, if this were a very small number of cases, then the impact may not exist.
The advantages of the index
Now I hope I am sure that bond funds than individual bonds more attractive to
Problems. However, what type of bond fund should buy?
There is a cause, rather than actively managed bond index funds, a strong argument
Bond funds. In general, bond index funds provide a small part of the bond market, extensive contacts with
Assets of the Fund expenditures. No small profits caused by higher rates of other types of you. In addition, the actively managed funds, investors bear the additional level of risk: risk management.
Finally, to have, rather than a single bond bond fund a distinct advantage.
Despite his current position, bond funds offer diversification, liquidity and dividend re-investment of the practicality of a better choice. However, low capital, low cost, low-cost bond index will help you achieve your investment portfolio risk control needs. Remember, with capital investment, the most comprehensive diversification, better results.

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