Bond Rush: Slowing the Stampede

Opiela, Nancy
June 2002
Journal of Financial Planning;Jun2002, Vol. 15 Issue 6, p58
Academic Journal
The article focuses on the approach of financial planners in managing bonds in the U.S. Planners admit that conveying bonds' role in a diversified portfolio is easier said than done. There are many options to choose from once clients agree that bonds should be part of their diversified portfolio. That choice depends on the specific purpose a bond will serve in the individual portfolio as well as the planner's outlook for the economy. At present, many planners prefers to keep clients in relatively short-term to intermediate bonds. According to certified financial planner Jocelyn Kaplan of Advisors Financial in Falls Church, Virginia, short-term bond funds are not much affected by interest rates, but offer a higher yield than a conveying bond. With intermediate bonds, you get almost the same rate of return as you do with long-term bonds, but there is less volatility. Many planners prefer bond mutual funds over individual bonds for their clients. Planners using bond funds are mindful that as soon as interest rates start going up, the value of bond funds goes down. Other planners also are keeping a closer eye on the managers of bond funds. In many cases, planners reserve individual bonds for clients with greater assets to dedicate to the bond allocation. Planners' estimates of how much an investor needs before venturing into individual bonds ranged from $100,000 to $500,000. Most agree that if an investor can afford to buy enough bonds to be properly diversified, the control over the income stream is worth the extra effort.


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