Despite any media-directed suggestions, if you are an individual investor, any advice to buy individual corporate bonds is foolish. Use a low-cost mutual fund or exchange traded fund (ETF) instead.
For the following reasons:
One: You would have to purchase at least thirty to fifty different bonds to get some semblance of diversification in the event of possible future defaults.
Two: You could never buy bonds as cheaply as a fund does. And a low cost fund’s fees would be far cheaper in the long run than your efforts.
Three: Buy your bond funds by their duration. The duration period you choose ought to be about the same or less as your intended holding horizon. (If you are not aware of the term, duration, learn about it before you take any advice on bonds. Also see Earl J Weinreb NewsHole® comments on them.)
Four: The dividends paid by the fund or ETF should be automatically reinvested. Periodic interest reinvestments would be very impractical with direct bond purchases.
I have looked at the research, and am convinced that individual purchases of corporate bonds are a misstep for both large and small individual investors.
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