Investing in Bonds For Dummies
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U.S. government bonds can be bought on TreasuryDirect without paying a markup. Nonetheless, Treasury bond funds offer instant diversification of maturities at modest cost. Remember that while conventional Treasury bonds are said to carry very little risk of default, they do carry other risks, such as interest-rate risk. And in these days of modest yield, you also run the risk that you may not be able to stay ahead of inflation.

Fidelity Government Income (FGOVX)

Contact: 800-544-6666; Fidelity

Type of fund: Actively managed mutual fund

Types of bonds: Intermediate government

Average maturity: 6.3 years

Expense ratio: 0.45 percent

Minimum investment: $2,500

This mutual fund, run by one of the largest U.S. asset managers, features an array of government bonds. The fund may use leveraging (borrowing) to juice the yield, which creates a tad bit of risk, but the management team seems careful not to go overboard.

iShares Barclays 7–10 Year Treasury Bond Fund (IEF)

Contact: 800-474-2737; iShares

Type of fund: Exchange-traded fund

Types of bonds: Intermediate-term Treasury

Average maturity: 8.5 years

Expense ratio: 0.15 percent

Minimum investment: None

As with all ETFs, you generally pay a commission to buy and sell this fund.

About This Article

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About the book author:

Russell Wild is a NAPFA certified financial advisor and principal of Global Portfolios, an investment advisory firm based in Allentown, PA that works with clients of both substantial and modest means. He has written two dozen books and numerous articles on financial matters.

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