Expert: Doug Ingram - 2/15/2006

Question
Hello Doug,

There is a debate in our home about where to put the funds that we rec from the sale of our home. We require income. My thought was Bond Funds at the Vanguard Group. My wife suggested individual bonds.

We value your opinion and thanks for your help.

Howard

Answer
If you're not professionals, you may be best off with a bond fund.  You'll get safety and monthly income.
If you do buy bonds, you might find some "deals", but they will be maturing (requiring some maintenance and reinvestment) and have staggered coupon payments (unless you plan well).
It also depends on whether or not you want taxable or tax-free bonds.
Maybe a compromise.  Buy half to 2/3 of the fund with your proceeds and dabble in individuals until you learn the game.
If you are going to buy your own, be careful about the ratings and choose a good broker.
You want to make sure you are getting good yields that are good to the market. Look at a screen with the rates and make sure the rates you get are HIGHER!

http://www.bloomberg.com/markets/rates/index.html

If a broker is showing you a 10-year AAA bond and the screens show 3.96% for tax free, make sure you are quoted that yield or MORE.
If you are buying non-government bonds, don't put too much in any one city or corporation.
(i.e. not all Travis County or not all Coca Cola)
Email doug@bondtraders.com and I'll suggest some brokers if you don't have one.