Portfolio Size and the Bond Funds vs. Bonds Decision

Riepe, Mark W.
February 2000
Journal of Financial Planning;Feb2000, Vol. 13 Issue 2, p36
Academic Journal
The article discusses factors for fixed-income investors to consider when choosing between individual bonds and bond funds and presents the results of a study by Jim Peterson and Vinay Singh. The difference in cost between various options is briefly discussed. Four major sources for the cost differential between individual and bond funds are discussed: brokerage commissions or fees on transactions, costs associated with a buy-and-sell transaction (a bid-ask spread), liquidation expenses, and fees paid for the management of a mutual fund. The results of the study are given in the form of a table of estimated annual expense ratios. Advice is given about balancing portfolio size and management type.


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