Reuters - Video

EDITION: U.S. | U.K. | IN

Investing 201

The better bond funds

Wednesday, Aug 07, 2013 - 02:40

Most bond funds, unlike the bonds themselves, never mature so you’re not guaranteed to get your money back. But target-date bond ETFs do exactly that, potentially making them a better investment.

▲ Hide Transcript

View Transcript

Investors burned by the downturn in bond funds have another option. Monty he has to yield income and ensure you get your money back in a certain year barring any default yeah. -- I want to look for numerous fluctuated lack maturity date. Target date on. So -- -- -- yourself -- start college in 2019. My twentieth nineteen. Another benefit the offer diversification. Instead of state owning one idea bond maturing and when he nineteen get a portfolio of more than seventy corporate bonds will mature or six years from now. And the party you have to make it easy to build -- as with the individual bonds. You can lower your interest rate and reinvestment risk by buying a series of different maturities. You can choose from three types of target date fine if he had municipal investment grade corporates and high yield better known as junk bonds. Guggenheim an ice yourself corporate fine yes. But Munis are only offered by -- high yield. By Guggenheim. Lipper's research manager of alternative investments Andrew Clarke says step with the corporate yet. I think to think proper investment for the issue -- moved out with a new news is that a lecture dealing with the highly rated for all. He -- -- general obligation. Of bonds these are the ones that are guaranteed by tax payments. You start running into greater credit risks that you -- with the -- great dad he clearly with the high yields. Despite their great performance. There's no guarantee. That the credit risk. Let's say it won't return to argue this. Within the core party yes he says there isn't much difference in the holdings. The newcomer in this arena behemoth black rocks -- is cheaper charging ten basis points. Guggenheim cost 24 basis points -- yes -- tune -- to be rated three things to keep in mind. -- a default within the bond portfolio could cut into the money you'll get back. To Morningstar senior fund analyst Timothy Straus says. Targeting yes or thinly traded so he advises investors to -- -- using limit orders not market orders. Three by these only if you don't yet hold enough bonds or you're selling off some bond funds. You don't want it and you bond allocation at a time when rates are bound to rise.

The better bond funds

Wednesday, Aug 07, 2013 - 02:40

Top News »

The Exchange »

Moving Pictures »