For investors who do want to speculate in high-yield bonds, one alternative may be a junk bond mutual fund, which can offer investors the relative safety of diversification.
Sentiment: NEGATIVE
In principle, junk bonds are basically useful, but they are used excessively and irrationally, notably in takeovers.
The best argument for mutual funds is that they offer safety and diversification. But they don't necessarily offer safety and diversification.
Portfolio theory, as used by most financial planners, recommends that you diversify with a balance of stocks and bonds and cash that's suitable to your risk tolerance.
I have never been a fan of bond funds. Unlike a direct investment in an individual bond that you can hold to maturity and be assured you will get your principal back (assuming no default), a fund has no finite maturity date and most funds are actively traded.
My view is that one should diversify broadly across different fund investments. However, it's tough for investors to try to pick the appropriate risk level that they should manage their funds at. Having a personal adviser would be helpful.
Many financial innovations such as the increased availability of low-cost mutual funds have improved opportunities for households to participate in asset markets and diversify their holdings.
Mutual funds have historically offered safety and diversification. And they spare you the responsibility of picking individual stocks.
We want to be a secure investment, a little bit like a bond.
What I invest in, while not risky for me, may be too risky for most people.
What I put in the stock market, I don't have to touch in my lifetime. I want to live off my bonds. I want to be that safe.
No opposing quotes found.