| There are a few important differences between individual bonds and bond ETFs. Corporate bonds trade only a few days a month. Many bond ETFs, like the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSE: LQD), trade millions of shares every day. Another difference between bond ETFs and individual bonds is maturity. Bond ETFs don't mature like individual bonds. They don't have a set date when investors get their money back. Instead, bond ETFs preserve a constant maturity. That's the fund's weighted average of all of the bond maturities in its portfolio. The ETF constantly buys and sells bonds to keep its portfolio's target maturity constant. One of the most attractive benefits of investing in individual bonds is that they pay out interest at scheduled intervals. Usually, investors receive these interest payments every six months. Bond ETFs pay interest too. But since bond ETFs hold numerous bonds at once, they receive coupon payments at different times. So most bond ETFs will pay out interest monthly, but the amount they pay will vary from month to month. But bond ETFs have several significant disadvantages. The first is that bond ETFs offer no principal protection since they never mature. You aren't guaranteed to get your money back in the future. The second big drawback is that bond ETFs are interest rate sensitive. You can lose money if interest rates rise. If rates rise, the value of bonds in an ETF may fall, as will the value of the bond ETF. You'll lose money if you have to sell the fund. With a bond ETF, you still have market risk. But when you own an individual bond, interest rates don't matter as much. You can mitigate the risk of rising interest rates by holding on to the bond until maturity. At that time, you'll receive the full face value of the bond. Trade Up to a Superior Investment While bond ETFs can easily provide investors with equitylike corporate bond market exposure, the investment instruments are far from perfect. And investors in these funds should also account for the fees bond ETFs charge, called the expense ratio, when calculating returns. So if you want to really juice up your yields while minimizing your market risk, stick to individual bonds. Good investing, Kristin P.S. Bonds are not to be underestimated. In fact, the bonds that Marc recommends can more than DOUBLE your starting stake in less than five years. And that's legally guaranteed! If you want to leave market volatility behind and earn up to 110% in less than five years without touching stocks or options, you'll want to see THIS. | 
Tidak ada komentar:
Posting Komentar