The worry is that there is one dominant
model of bond investing, in which giant mutual funds and exchange - traded funds buy and hold every newly issued bond that comes along.
The investment grade rating is reserved for those debts that have a high likelihood of being repaid and are relatively safe for investors, though safety can not be absolutely guaranteed [see also A Brief
History of Bond Investing].
In the old
days of bond investing, you would pick a bond fund with a narrowly defined mandate, like «medium - term corporates,» and the bond manager would spend his life trying to outperform the stated benchmark.
Bond funds can vary according to what
types of bonds it invests in (corporate, munis, U.S. Treasuries, global bonds, or a mix).
Investors effectively lock in yields on bonds when they purchase them, and take some of the guesswork
out of bond investing.
The main reason for the huge
popularity of bond investing is because it involves comparatively low risk than other investment methods and in almost all the cases, the principal amount that you spend in buying bonds are safe and repaid to you along with an annual interest once the term of the bond is over.
In order to tackle this risk, when following the bullet
strategy of bond investing, you purchase bonds having maturity date during the same period, but you separate the purchase of those bonds over a period of 4 years.
The main
advantage of bond investing is that in almost every case, the principal amount that you invest while buying a bond is completely safe and repaid back to you at the end of the maturity period.
Or some person with way too much time on their hands back testing the maximum return possible from any
form of bonds investing.
However, talking about the disadvantages of bond investment, there are different
disadvantages of bond investing and these disadvantages are rather dependent on the following factors:
Five
Myths of Bond Investing A guide to some of the most dangerous misinformation about investing in bonds and bond funds — along with practical steps you can take to invest wisely on the basis of more - accurate evidence.