No. of Recommendations: 7
The major problem with owning bonds themselves is that usually you must buy them from a bond dealer and sell them to a bond dealer. The bond dealer has a bid ask spread in each direction. Most bonds are traded over the counter. Those that are listed are not available to small investors at those prices. Hence, you never know what the market price really is (except by comparison with similar bonds offered by other dealers).

For these reasons, most individuals must hold their bonds to maturity. So you buy quality bonds and sell them only in case of some emergency. You usually must own at least $5k of those bonds to get any kind of offer for them. And often bid ask means selling will cost you a year's interest or more.

The large holding requirement also makes it difficult to diversify.

You can avoid most of these problems by buying Trust Preferred stocks. These are essentially long bonds which are listed and traded on major exchanges as preferred stocks. That means market prices are quoted and you can track them once you learn the stock ticker. They are traded at discount broker commissions. You can buy as little as one share, often at $25 or less. They are available in a full array of bond ratings from AA down to junk ratings. So you can construct a portfolio, buy and sell at will, and move in and out of risky position as the market warrrants.

The best source of information on these is But I post a list of many of them occassionally. The most recent one is in message 28791 on this board. See them here--
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.