When it comes to bonds, many investors still believe in owning individual bonds till maturity. It feels more right in that firstly you do not suffer from capital losses if you held the bond to maturity and secondly you get predictable coupon returns that was promised to you at the start. Unfortunately, the investors ran into some problems:

1. They demanded a certain respectable interest yield on their bonds. If it is too low, they find that it is unattractive and would not go for it.
2. They need to reinvest into another bond after the previous one matures. This maturity period may take place anytime.
3. Prefers bonds in local currency
4. For some, they might not have enough capital to diversify (traditionally the minimum you need to purchase bonds is $250,000)

With these requirements, what tends to happen is that these investors push themselves up the risk spectrum. When they push themselves up the risk spectrum,...