On Bond Funds, Again

Unless you’re a complete novice … then bond mutual funds ….should be one of your final options to gain fixed income exposure.

It’s almost like the opposite as what might be done on the equity side where you might have a core group of ETFs with stock selection as a “satellite” strategy. For fixed income, a laddered bond portfolio could be the core and fixed income ETFs could be used as “satellite” positions.

That might not make sense on a first read especially with regard to the use of bond ETFs. However, I think that we will see a breakthrough in this space where more actively managed fixed income ETF mandates appear as investors continue to push the limits to extract more yield from their portfolios in what is a tough, low-yield world.

http://seekingalpha.com/article/32020-vanguard-offers-four-n...

Exactly what I’ve been arguing: Bonds should be owned directly. Bond funds should be used when accessing the underlying is difficult or impractical.