FundX President Janet Brown shared five reasons why she prefers bond mutual funds to bond exchange traded funds (ETFs) with Forbes. Click here to read her latest Forbes post.
“One of the tenets of index investors is that few active managers beat their benchmark index over time,” Janet wrote. “In fixed income, however, there are many managers who have beaten their benchmark consistently for many years. (Jeffrey Gundlach of DoubleLine and Bill Gross of PIMCO are two examples.) “
Bond ETFs are usually index-based and most are very new. “The oldest bond ETF is just six years old, and most are less than three years old,” Janet pointed out, while bond mutual funds “have been around for decades.” Although bond ETFs can be traded at any time, but they don’t necessarily trade at their net asset value, and they also may be sold short.
Perhaps the most important reason Janet preferred bond funds to ETFs is volatility. As we explained last week, bond ETFs have been more volatile than bond funds, and Janet asked, “Why accept greater volatility if you don’t get compensated by better performance?”
(To read all of Janet’s posts on the Forbes Intelligent Investing blog, click here.)