A banker has advised a reader, K, that he buys into a bond fund. This was what K wrote in his email to me:
Hi AK,
i read your post and i like your advise on bonds. im currently unemployed and i need a steady form of income for my family.
A citi banker suggested that i buy a fund that is comprised of bonds that pays abt 7 percent an annum.
please give me your opinion on such investment comparing to shares. since its little fluctuation and it gives me income
thanks
K
My reply:
Hi K,
Too little information for me to make an informed decision, unfortunately.
However, if I were to hazard a guess, for a basket of bonds to pay you 7% per annum, I guess these bonds are not of investment grade. They could be "junk" bonds. Risk level must be higher which explains a ......