Here’s a Low-fee Way to Invest in Bonds

Article Excerpt

We generally advise against investing in bond funds because we don’t believe bond fund managers can add enough value to offset their fees. When bonds yielded 10%, it made some sense to buy bond funds and pay a yearly management fee of, say, 2%. Now that bond yields are down closer to 4%, it makes a lot less sense. The bond market is highly efficient and that makes it difficult for bond fund managers to beat the index. In addition, bond funds expose you to the risk that the manager will gamble in the bond market and lose money. However, if you need steady income and want to hold bond funds, here are two funds that have low fees and don’t engage in speculative trading. Holders of both iShares bond funds profit from wholesale bond pricing and narrow spreads. Investors buying bonds on their own in small quantities don’t pay commissions to their brokers. But they pay a hefty markup, because of…

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