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Old 06-25-2014, 12:47 PM   #21
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I have no idea what prompted Suzie's comments; but, the major drawback to bond funds in my eyes is the absence of a real maturity. I hold no bond funds and currently no bonds. I do have some cash producing REITs and real estate accounts in my retirement plans

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Old 06-25-2014, 03:27 PM   #22
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Originally Posted by robertf57 View Post
I have no idea what prompted Suzie's comments; but, the major drawback to bond funds in my eyes is the absence of a real maturity. I hold no bond funds and currently no bonds. I do have some cash producing REITs and real estate accounts in my retirement plans
Yes, there are pros and cons to that as well. If you have enough money to invest in enough individual bonds to cover default risk, stagger their maturity dates and hold to maturity, I think holding individual bonds is probably better if you can do due diligence on the bonds.

But yes, with bond funds there is no final maturity where you are guaranteed to get your entire principal back (assuming no default). So you are at the mercy of Mister Market and the current trend of interest rates.

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 06-25-2014, 07:41 PM   #23
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But there are target maturity bond funds available that act like a pro rata participation in a diversified bond portfolio and return principal in the target maturity year. These products are a middle road between bond funds and individual bonds. You pay a fee for investment selection and management (generally 10 - 24 bps, and 42 bps for high yield).
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Old 06-25-2014, 09:24 PM   #24
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Originally Posted by ziggy29 View Post
Bond funds (at least taxable ones) are *best* held in IRAs and 401Ks. These are the least tax-efficient investments in a typical portfolio. Yeah, munis in an IRA would be a disaster, but not taxable bond funds. For the same reason it's sometimes best to hold more tax-efficient stocks, dividend stocks and stock funds in taxable accounts, because dividends and long term capital gains will be taxed at lower rates, not the marginal income tax rate like they would be if withdrawn from an IRA.
Exactly. Information and rationality strike again!

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