The spread of your bond investment
Investing in bonds: The pros and cons of unit trusts vs direct
By opting to invest in a bond fund, you get an automatic spread of investments.
This isn’t the case with investing in bonds
directly. You hold individual bonds, so have less diversification.
Picking what bond to buy
By investing in a bond unit trust, the fund manager decides what bonds to buy. You just have to choose the fund.
If you opt to invest in bonds directly, you have to make the decisions, but you could consult an advisory stockbroker.
If you buy into a unit trust, your income and growth of the fund can fluctuate.
If you invest in bonds directly, you know your returns as long as you hold onto the bonds until maturity.
How much money you need to invest
Buying into a unit trust is the cheapest avenue. You can buy in from around R500.
Investing in bonds directly can be expensive with high minimum investment amounts. But you do have the option of buying government retail savings bonds, which you can buy into from R1,000.
How often you can invest
If you opt for a bond fund, it’s easy to set up a debit order so you can put money into it on a regular basis.
If you opt to buy bonds directly, you invest a lump sum.
How easy it is to invest
Unit trusts are easy to invest into. You can do it over the phone, by post or online.
With the exception of retail savings bonds, buying into bonds is a bit more difficult. You’ll need a stockbroker and some bonds are only available to large investors.
As with all unit trusts, you need to pay management fees for investing in a bond fund.
Apart from stockbroker fees and commissions, you pay no management fees when buying bonds directly. Retail savings bonds have no management fees.
Availability of information
It’s easy to get information on certain funds.
But if you opt to invest in bonds directly, some of the information can be hard to fund and hard to understand.
So there you have it. How to decide whether to invest in bond funds or bonds directly.
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