Last week I wrote about a widow who wanted to boost monthly investment income she received from her portfolio. If you missed the column, here’s the bottom line: Consider bonds. (Click here to read the article).
What’s the easiest way to buy bonds?
“Isn’t there an easy way for me to get monthly income from my portfolio… kind of like a pension?” my client inquired. She asked a great question, and I was happy to explain to her the pros and cons of bonds and bond funds. For her, the best part was knowing that the bond funds would pay her over $1500 a month in dividends.
What’s a bond fund? It’s a mutual fund, but instead of fund managers putting the investors’ money in stocks, they buy in bonds, and the clients own a proportional piece of the whole thing. There are different types of bonds funds, sometimes referred to as “open end” funds and others are known as Exchange Traded Funds (ETFs). Be sure to read the prospectus before investing this way to boost monthly investment income.
What are some benefits of bond funds?
- Diversification – As soon as you invest, your money is divided up amongst many different securities.
- Professional management – Though it’s no guarantee, the pros normally have a better understanding of the markets than amateurs.
- Monthly income – Bond funds normally pay dividends on a monthly basis, which is great for your cash flow.
What are some of the disadvantages?
- Risk – Mutual funds can lose money.
- Taxes – Depending on your situation, a mutual fund could be taxable.
- Fees – Different funds have different fee structures, so you should learn the details.
These are just some of the pros and cons of bond funds.
If you are interested in learning more about how bond funds can boost your monthly investment returns call my office (02-624-2788) or join my free webinar about how to make money with bonds by signing up here
Douglas Goldstein, CFP®, investment advisor is the Director of Profile Investment Service, Ltd., which specializes in helping people who live in Israel with their U.S. dollar assets and American investment and retirement accounts. He helps olim meet their financial goals through asset allocation, financial planning, and using money managers.
Published November 12, 2018.