Apriem Chief Investment Officer Bejamin Lau discusses the timing of bond investments and how that impacts shareholder payouts. Below is an excerpt:
“I recommend staying away from open-ended bond funds with no maturity,” said Benjamin Lau, co-chief investment officer at Apriem Advisors in Irvine, California. “The constant rotation of bonds in the portfolio makes it difficult to predict the future value of these investments and what they’d be worth when you need them.”
Lau said this is the big advantage of target-maturity bond ETFs. “The ETF will target a specific year, say 2018, and buy bonds with that maturity. The goal is to have all the bonds mature in 2018 and shareholders will get paid out the cash before the end of that year.”
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