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Navigating bond funds: Yes to yields but risks aplenty in high-yield assets

Bond funds enable diversification with modest investment, but steep redemptions at times of crisis can cause long-term investors to suffer

 Genevieve Cua
Published Mon, May 20, 2024 · 05:00 AM
    • Unfinished residential buildings by China Evergrande Group. The developer defaulted on its bonds and was ordered to liquidate this year.
    • Unfinished residential buildings by China Evergrande Group. The developer defaulted on its bonds and was ordered to liquidate this year. PHOTO: REUTERS

    IN FIXED income investments, the toss-up between a direct investment in a bond and a bond fund seems a no-brainer.

    Here’s the most obvious advantage: A fund enables you to diversify across a basket of issuers with a very modest lump sum of S$1,000 or less if you opt to invest regularly. A direct investment in a single bond typically needs an outlay of at least S$200,000 or US$200,000.

    But there are advantages too in holding single bonds – if you can afford it and have studied an issuer for credit strength.

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