Should I invest in bonds? Advantages & Disadvantages

Reasons to invest in income fundsShares have always been the flashy big brother to bonds in the eyes of investors looking for a great return on their investment. However, shares have lost quite a bit of their glitter lately, as the equities markets continue to demonstrate, all too painfully, their ability to rival the Tower of Terror at Dreamworld!

Bonds are a lot less volatile and tend to come into their own when equities are in a hole. In fact graphs will often show an inverse position with equities and bonds. The fact is investors need a diversified portfolio more than ever and bonds, as part of fixed income investments, can fill the bill nicely.

Using a fixed income fund gives ordinary investors access to bonds they would never be able to invest in as a solo player. The power of investors combining together to pool funds, managed by a professional fund manager, is appealing, as are the tax advantages in some scenarios.

Article updated 07/06/2012

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