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Author: imcharliehm Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35400  
Subject: Re: Bonds vs Bond Funds Date: 2/2/2002 9:32 PM
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I'm not Crosenfield, who most definitely is a reliable source of bond info and judgment, but I'd suggest that WHERE to buy is the easy part, namely any broker you do business with, unless its strictly a DAT firm like IB.

WHAT to buy is the tough part, though here again, there are easy parts and hard parts to the problem. Treasuries are no-brainers. In fact you don't even need a broker and can buy them directly from the Treasury Dept in a little as $1,000 increments. Just pay attention to the yield curve and Fed policy and buy T-bills, notes, and bonds when they're on sale.

How do you know when they're onsale, you ask? Get a hold of any introductory book on bond investing, with my favorite being Sharon Saltsgiver Wright's "Getting started in Bonds", and well as hit the major investment sites like SmartMoney, which have tutorials and tools, like yield calculators and living yield-curve demos.

Corporates are a bit harder. At a minimum you should know how to do fundamental analysis to the same degree that you do for your stock research, unless you want to stick strictly with the upper-tier credit stuff and depend on the informed, reliable, and impartial judgments of the rating houses like S&P and Moody's.

For spec-grade bonds, your choices of where to buy narrows considerably, with most brokers reluctant to make the trade unless you know what you're doing and explicitly tell them that you're making an unsolicted trade. Also, the research requirements increase dramatically. For junk bonds, I think E*Trade does a good job.

Lastly, be aware that bonds are mainly an institutional game to which small retail investors are uninvited and unwelcome and that spreads are atrocious compared to stocks. But be persistent. Buying your own bonds is way better than bond funds, IMHO, because you can hold to maturity rather than suffer the market risk of bond funds. Also, be aware that right now things are as tough and uncertain in the bond market as in the stock market, compared with the easy money of two years ago.

Charlie
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