Chapter 15. Think Carefully About Managed Bond Funds

Before turning to equity funds, let's consider the safer mutual funds, bond funds and money market funds. After all, this is a significant segment of the industry. We consider two issues here:

  1. Should most investors own bond mutual funds rather than try to invest directly in bonds?

  2. If you are going to own bond mutual funds, should you pursue actively managed funds or bond index funds?

Let's consider the first issue from a historical perspective, and then examine how this situation has recently changed.

Part of the traditional case for owning bond funds is that investors want a high-quality, safe, and conservative investment (i.e., they wish to own fixed-income securities) and indirect investing in ...

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