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What's your opinion on purchasing bond funds vs. creating your own bond ladder?

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  Answers  |  3

July 12, 2017

It all depends on how much money you are going to invest. Typically, financial advisors recommend buying 10 individual bonds to diversify risk. Assuming $25,000 per bond, you would need $250,000 to create an individual ladder: 1-10 year maturities.
If you have less money, a bond fund would be more appropriate.

$commenter.renderDisplayableName() | 11.23.17 @ 03:58

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July 12, 2017

I believe bond funds are the way to go and I recommend Vanguard's Total Bond Market Fund. This way you don't have concern yourself with he type of bond or its maturity as you would with individual bonds in a ladder

$commenter.renderDisplayableName() | 11.23.17 @ 03:58

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July 12, 2017

That's a difficult question to answer without having more info, but it depends on the amount you have to invest, how much risk you are willing to take on, and whether you are using the bonds for immediate income or to reduce the volatility of your overall portfolio. You need a minimum of $250,000 to do your own ladder, and that assumes you are willing to only use 10 bonds. The risk? If just one defaults, that's a 10% hit. With a ladder, you control the maturities. With a fund, you lose that control. With a fund, you get (and have to pay for) professional management. A fund may be able to negotiate lower purchase prices of bonds based on its buying volume. A fund must keep a certain amount of cash on hand for potential redemptions, which drags down the overall return of the fund. So, lots of variables.

$commenter.renderDisplayableName() | 11.23.17 @ 03:58

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