Don't Buy Bond Index Funds or Individual Bonds

When it comes to bonds, conventional wisdom has it wrong. Index funds make little sense. Ditto for investing in individual bonds.

Actively managed mutual funds that invest in stocks have gotten a bad rap -- for good reason. Their biggest shortcoming is that, with few exceptions, their expense ratios are disgracefully high. Largely because they charge too much, about two-thirds of actively managed stock funds fail to match their benchmarks over the long run.

But for one giant asset class, actively managed funds with reasonable fees are far superior to index funds. When it comes to bonds, I think actively managed funds are a better choice than index funds.

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Steven Goldberg
Contributing Columnist,
Steve has been writing for Kiplinger's for more than 25 years. As an associate editor and then senior associate editor, he covered mutual funds for Kiplinger's Personal Finance magazine from 1994-2006. He also authored a book, But Which Mutual Funds? In 2006 he joined with Jerry Tweddell, one of his best sources on investing, to form Tweddell Goldberg Investment Management to manage money for individual investors. Steve continues to write a regular column for and enjoys hearing investing questions from readers. You can contact Steve at 301.650.6567 or