Fixed income fiesta

31Mar07

Fixed income investing is, in our opinion, a woefully undercovered topic in the investment blogosphere. However, a couple of articles today highlight how recent developments have made fixed income investing easier (and cheaper).

Jane J. Kim in the Wall Street Journal notes “Some big obstacles to bond-buying are starting to disappear.” That is due to a newly introduced price quote system, more transparent bond pricing and trading on the brokerage side and the underpublicized way individuals can purchase Treasury bonds directly from the U.S. Treasury.

Direct investment in bonds can be cheaper for those individuals with sizeable portfolios. However the introduction of even more bond ETFs is making this an even more attractive approach for investors. Tom Sullivan in Barron’s does a good job of running down the developments in the fixed income ETF space. Below you can see how the bond ETF waterfront at iShares has grown and changed. (source: Barron’s)

Bond ETFs

A point worth noting is that these bond funds generally have low expense ratios, 0.20% per annum or less. This makes them a worthy alternative to trying to build a bond portfolio by yourself.

Whether one is fleeing the stock market in light of recent turbulence or because of good old fashioned diversification reasons, these developments in individual bond trading and bond ETFs are good news indeed.

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