Tài liệu Taxable Bond Investing: Bond Funds or Individual Bonds? pptx

Taxable Bond Investing:

Bond Funds or Individual Bonds?

Vanguard Investment Counseling & Research

Connect with Vanguard > advisors.vanguard.com > 800-997-2798

Author

Scott J. Donaldson, CFA, CFP®

Executive summary

For most taxable bond investors, bond mutual funds have a number

of advantages over individual bond portfolios in terms of diversification,

cash-flow treatment and portfolio characteristics, liquidity, and costs.

Individual bonds do provide certain benefits compared with bond mutual

funds, and these advantages revolve primarily around a preference for

control over security-specific decisions in the portfolio. The cost of this

advantage can be thought of as a “control premium” that is reflected

in generally higher (or additional) transaction costs, lower liquidity, more

limited return opportunities, and higher bond portfolio risk. The cost of

the control premium is more pronounced for buyers of corporate bonds

and mortgage-backed securities than for buyers of U.S. Treasuries.