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Only purchase bond and fixed income securities using low cost bond and fixed income index mutual funds

Fixed income trading is a complicated investing process that individual investors ought to leave to highly experienced professional bond and fixed income index mutual fund investment portfolio managers. The trading of fixed income and bond investments is substantially more convoluted than the trading of stocks.

Moreover, bond and fixed income market price determination is substantially more hidden, and fixed income and bond investments and the fixed income markets have wide bid and ask margins. From a realistic perspective, you purchase bond securities at retail costs and sell fixed income and bond investments at unfavorable discounted wholesale prices which very much favor the fixed income market trading firms.

Individual investors benefit, if they learn an increased amount with regard to no load bond funds

Bond investing investment pricing is very different when compared to the markets for equities. A public company very often has just one kind of common stock security. In comparison, this same publically traded company might have dozens, even many hundreds, of separate outstanding bond and fixed income investment instruments. Relatively few individual investors have the necessary knowledge, information, and experience to evaluate bond asset pricing. Fixed income investment instruments have different valuation aspects than do common stock securities. Moreover, issued and outstanding bond and fixed income securities need differing price setting methods.

Common stock securities provide the investor an ownership claim to part of the market value of the publically traded firm and to dividend payouts, if the Directors declare such dividend payouts. In contrast to common stock securities, corporate bond and fixed income securities provide their holders a greater right to the firm’s operating cash flow to fund fixed income and bond security interest and principal payouts. When bondholders’ ownership claims to the publically traded firm’s net cash flow cannot be fulfilled, then default and bankruptcy could be required.

The public firm may be forced to recapitalize in bankruptcy court, and all equity ownership could transfer to its creditors and bondholders. These bankruptcies usually are very difficult, slow, and distasteful events.

This is called the default risk. Projections concerning the different potential of failure to repay can cause large price differences for bond assets which otherwise might have the same pricing terms. Figuring out if fixed income obligations are likely to be made by fixed income issuing firms within the term of the bond asset is better turned over to very experienced fixed income mutual fund portfolio managers.

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