Our team of Income Specialists possesses the specialized training and knowledge to avoid costly mistakes, and effectively create customized portfolios of actively-managed individual fixed-income securities on behalf of our clients seeking to enjoy retirement.
Why Individual Bonds?
When you buy an individual bond, you have a contract with a borrower. Naturally, that contract is only as good as the creditworthiness of the borrower.
The contract states you’ll get a fixed rate of interest for the life of the bond, and when the bond matures, you have a guarantee that the borrower will repay your principle at maturity…it’s a contract!
This is one of the reasons that Fixed Income investing can be such a viable option when it comes to planning and saving for retirement. To learn more, check out our related post: What is Fixed Income Investing?
What about Bond Mutual Funds?
But when you buy a bond mutual fund, neither such guarantee exists.
So why do financial advisors utilize bond mutual funds instead of individual bonds?
It could be because many advisors got into the industry during the 1980’s and 1990’s, in what was the best stock market in US history. Since the stock market was providing such stellar returns, many advisors became specialists in growth-oriented, stock market-based strategies.
Also, since the analysis of stocks and stock mutual funds is much different from the analysis of fixed income investments, many stock market-based advisors will often take the easy way out and will just place their clients’ money into bond mutual funds when asked about fixed-income investments.
Many Advisors Will Just Take the Easy Way Out
Instead of spending the time to research individual securities and run the risk of choosing the wrong bond, many advisors will just advise you to invest your money in a bond mutual fund to give you instant diversification. One of the benefits, for the advisor, is that if the fund performs poorly, they can point the finger at the fund manager.
So, in a way, you can think of bond mutual funds as a “crutch” for stock market-based advisors because they’re leaning on a fund manager to pick the individual bonds for them. But like most things in life, simplicity comes at a cost. In this case, the cost is passed along to the investor, along with the added risks and stress that mutual fund investing can bring with it.
Ready to Start Generating Renewable Streams of Income?
If you are in retirement, or within 10 to 15 years of retirement, call us at (888) 888-4176 to find an Income Specialist in your area who can help reduce your exposure to stock market risk and help you generate ongoing streams of income you can count on well into retirement.