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 QuantumOnLine.com. But I post a list of many of them occassionally. The most recent one is in message 28791 on this board. See them here--

http://boards.fool.com/Message.asp?mid=28037457
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