Recently, I met a widow who wanted to boost monthly investment income she received from her portfolio. We had a lengthy meeting, but here’s the bottom line: consider bonds.
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 bonds, and the clients own a proportional piece of the whole fund. There are different types of bonds funds; some are referred to as “open end” funds and others are known as Exchange Traded Funds (ETFs). Be sure to read the prospectus before investing.
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 professional money managers normally have a better understanding of the markets than amateurs.
- Monthly income – Bond funds usually 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 learn the details.
Wait! What about inflation?
While it’s true that inflation can eat away at the value of your investments, ask your financial professional whether using inflation-linked bond funds makes sense for you. When the inflation-linked bonds in the fund increase in value as inflation goes up, you can protect yourself to some extent.
If you’re interested in learning more about how bond funds can boost your monthly investment returns, call my office (02-624-2788) or watch a 17-minute video on the topic: Profile-Financial.com/bonds
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®, GFP®, is the director of Profile Investment Services, Ltd. www.profile-financial.com. He is a licensed financial professional both in the U.S. and Israel. Call (02) 624-2788 for a consultation on how to set up your American assets to meet your financial goals. Securities offered through Portfolio Resources Group, Inc. Member FINRA, SIPC, MSRB, FSI. The opinions expressed are those of the author and not those of Portfolio Resources Group, Inc. or its affiliates. Neither PRG nor its affiliates give tax or legal advice.
Published November 12, 2018. Updated March 2022