njhowie
Thinks s/he gets paid by the post
- Joined
- Mar 11, 2012
- Messages
- 3,931
I agree with you OldShooter.
Additionally, any individual can do the exact same thing as any bond fund, though obviously the individual will have less diversification having a more limited amount of funds. Further, as you point out, at the end of the day, the fund has to also cover their fees - which will likely come as a result of taking on higher risk.
It's my belief (and what I do with my portfolio), once an individual's portfolio gets above a certain point, it is more beneficial to purchase individual bonds. Personally, the draw is that I have total control. I won't employ leverage/margin when I buy. The funds do this to juice their returns. They have to get additional yield to cover the fees. In a low interest rate environment, that could work. However, now that rates are rising, leverage could cause problems for those taking more risk than they should.
When I purchase bonds, I have total control over the types of bonds I will purchase, the maturity, and the quality. The funds, again to juice returns, will have some amount of garbage bonds, again to juice their returns. How many were caught holding Puerto Rico bonds? I won't buy garbage like that.
Similar to Mr._Graybeard, I stick to quality municipal bonds. I manage my maturity/yield curve to meet my personal requirements. I hold to maturity, knowing my yield to maturity and profit the day I make any purchase. Anyone who purchases a fund has no guarantees of anything...besides the greater liquidity.
Additionally, any individual can do the exact same thing as any bond fund, though obviously the individual will have less diversification having a more limited amount of funds. Further, as you point out, at the end of the day, the fund has to also cover their fees - which will likely come as a result of taking on higher risk.
It's my belief (and what I do with my portfolio), once an individual's portfolio gets above a certain point, it is more beneficial to purchase individual bonds. Personally, the draw is that I have total control. I won't employ leverage/margin when I buy. The funds do this to juice their returns. They have to get additional yield to cover the fees. In a low interest rate environment, that could work. However, now that rates are rising, leverage could cause problems for those taking more risk than they should.
When I purchase bonds, I have total control over the types of bonds I will purchase, the maturity, and the quality. The funds, again to juice returns, will have some amount of garbage bonds, again to juice their returns. How many were caught holding Puerto Rico bonds? I won't buy garbage like that.
Similar to Mr._Graybeard, I stick to quality municipal bonds. I manage my maturity/yield curve to meet my personal requirements. I hold to maturity, knowing my yield to maturity and profit the day I make any purchase. Anyone who purchases a fund has no guarantees of anything...besides the greater liquidity.
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