I mean of course individual bonds
rather than bond funds since we are talking about a specific loan with specific interest rate and the promise to return the debt at maturity.
In exchange for that level of safety, money market funds usually provide lower
returns than bond funds or individual bonds.
This is because although they are both low risk in their categories stock funds have a higher risk / return
potential than bond funds.
Seven ETFs and a ladder of fixed income investments (rather
than a bond fund at this stage in the cycle).
A lot of people argue that individual bonds are
safer than bond funds, however, this isn't exactly accurate.
We have seen that bond ETFs are generally more
volatile than bond funds, and one of our goals in managing fixed income is to limit volatility.
There are many situations where it does indeed make sense to use a high - interest savings account
rather than a bond fund.
By diversifying into CDs, at least part of my money is earning a much higher interest rate than my money market funds, and is subject to less
risk than my bond funds.
Next, capital gains are more of a stock fund
thing than a bond fund thing, so capital gains distributions on bond funds are insignificant.
Expenses tend to be higher for stock
funds than bond funds, and higher for actively managed funds than index funds.
Liz Tammaro: And I think this is a related question that's coming to us from Bob: «I have read that if your time horizon is
longer than the bond fund, or the bond's duration, you benefit in a rising - rate environment.
And in Canada, where the bulk of the preferred share universe is of the rate - reset variety — instead of offering a fixed payout perpetually, their coupon is reset in relation to the five - year Government of Canada bond rate every five years — they may offer more
protection than bond funds from rising interest rates.
Interest rates have been rising since May and this has affected all areas of the bond market, but in many cases, bond ETFs were hit
harder than bond funds.
nce a bond fund is similar to a rolling bond ladder, a good direct CD generally has lower term
risk than a bond fund.