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Picking between individual bonds and bondETFsmight feel overwhelming.
Here are the options and factors to consider when choosing the bestinvestmentfor you.
Also seethese mistakes to avoid when investing in bonds.
Bonds vs.
The primary Individual bonds are debt securities issued by entities such asgovernments or corporationsto raise capital, he said.
On the other hand, BondETFsare exchange-traded funds that invest in a diversified portfolio of bonds.
Liquidity
Bond ETFs offer greater liquidity compared to individual bonds, said Shirshikov.
This is particularly advantageous for investors who may need to access their funds quickly.
This reduces the risk associated with the potential default of any single issuer.
In contrast, purchasing individual bonds would require asignificant capital outlayto achieve a similar level of diversification.
Bond ETFs typically have lower transaction costs, he said.
They allow investors to buy and sell shares with minimal brokerage fees.
Investment Strategy
It is also important to think aboutinvestment strategyand goals before choosing betweenindividual bondsand bond ETFs.
For example, a retiree seeking predictable income might choose high-quality municipal bonds that provide tax-free interest.
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