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Registered investment advisor, bonds, dividend investing, ETF investing
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One small added benefit that I offer clients is extra advice. The following would be an example:

By the by, I wonder if I can ask you for some bond advice. I currently use Fidelity for most of our investments, but have become quite dissatisfied with the breadth of its individual bond offerings. Can you suggest an alternative that would have better bond breadth along with reasonable bid/ask spreads? I’m not particularly interested in bond funds as I want to be in control of buy/sell timing for tax purposes.

Bonds are tough in a retail context. I grew up spoiled as a bond manager, having never done bonds in a retail context, but reading horror stories from those who were “getting their eyeballs ripped out” by their brokers. Now, from what I heard, Fidelity was among the better in the retail bond area, but I know that most retail bond areas are the “home for misfit bonds.” Odd lots, tag ends, bonds that are cheap for a reason … and that whatever is allocated to retail for those who can or want to ask for bonds that are newly issued, you have to be on your toes and in the right place at the right time.

So I’m used to the relatively good liquidity available on the institutional side, where once you get up to trading $1 million at a time, the bid/ask spread is around 3 basis points in yield, and selection and other tools are considerable. If I were forced to manage the bonds of a smaller portfolio (which I did for a prior employer, who only had $7 million in bonds), I would do one of the following:

  • Outsource it to Vanguard, PIMCO, or Loomis Sayles.
  • Or, what I actually did: Buy Treasuries directly, and use closed-end funds and ETFs to allocate the rest. If I had less than $20 million of bonds under management, that’s what I as a manager would do … even with the added fees and limited palette of colors to paint with, it beats the costs and limitations of retail bonds.

Now, someday I’d like to bring out a bond fund/strategy, but I want to get this portfolio established first. I'd like to crowdsource the opinions of others, and ask where others think they get a good deal in retail bonds.

What would you do? Are there better alternatives for retail investors in bonds?

Source: On Bonds in Retail Accounts