No. of Recommendations: 9
My point of view is different, but I've been buying bonds for 35 years and at this point wouldn't own a bond fund on a bet. Particularly not now if interest rates have bottomed.
I'd use a full service broker, which for stocks I wouldn't dream of doing. I'd insist on corporate BAA or higher rated, and companies I have heard of and trust. I would divide my $20000 over 4 bonds, $5000 of each. Bonds pay interest every 6 months, so the choices are Jan-July, Feb-August, March-Sept, April-Oct, May-Nov or June-Dec. I'd pick four different for the first four bonds, and the next two bond purchases would be the remaining choices. I would not choose any two bonds maturing the same year. I insist on a discount; a small one will do. I will not pay a premium. As long as I am buying at a discount, I will ignore call dates. As I add to my portfolio, I'll continue to try to keep my monthly income about even for each month of the year, or higher in the month my house or car insurance or property taxes is due. When a bond matures or is called, I buy another one.
Your bond commission with a full service broker isn't more than for a discounter. I was astonished to learn that the discounter may charge you an extra commission when the bond matures--the full service folks don't do that.
If you buy at a discount, and the bond matures at face, you make a little capital gains. You know in advance what your investment will be worth at maturity--you have no such assurance with stocks. With bond funds there is no maturity date, and there is no assurance that you will get your principal back.
Now you have different opinions, which you will evaluate and make your own decision! It's your money!
Best wishes, Chris
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