Corporate Bonds

[pepper24]

Originally Posted by Slava

I hope that you meant to have green font on that part....

Nope. What I meant was if you deal with an advisor deal with a fee-only planner. When you deal with someone who gets paid on commission you get a conflict of interest. They'll push crappy products like whole life insurance and high fee mutual funds as they get a higher commission, not necessarily because they are the best products for your financial goals.

That's not to say that they're all bad and I probably could have left out the greasy part.

[MoneyGuy]

Originally Posted by pepper24

Nope. What I meant was if you deal with an advisor deal with a fee-only planner. When you deal with someone who gets paid on commission you get a conflict of interest. They'll push crappy products like whole life insurance and high fee mutual funds as they get a higher commission, not necessarily because they are the best products for your financial goals.

That's not to say that they're all bad and I probably could have left out the greasy part.

Definitely would have made it less offensive. I should list the services I provide to clients who need them. It would be a long list. I earn my pay. Not all clients take advantage of all my services, but many do use a lot of what I can do for them.

[Slava]

Originally Posted by pepper24

Nope. What I meant was if you deal with an advisor deal with a fee-only planner. When you deal with someone who gets paid on commission you get a conflict of interest. They'll push crappy products like whole life insurance and high fee mutual funds as they get a higher commission, not necessarily because they are the best products for your financial goals.

That's not to say that they're all bad and I probably could have left out the greasy part.

Obviously you've just heard the bad, or dealt with bad advisors. The reality is that almost every mutual fund pays the exact same for me, so there is no incentive for me to push people to one fund over another . Most advisors operate in that manner.

As far as the life insurance comment, this is just plain wrong if you get a good advisor to begin with. I almost always sell people the cheapest insurance policies because its the right thing to do, not because of the amount of commission I make. My entire goal is to do whats best for peoples financial goals...so that is a moot point.

[Cowboy89]

Originally Posted by Slava

Obviously you've just heard the bad, or dealt with bad advisors. The reality is that almost every mutual fund pays the exact same for me, so there is no incentive for me to push people to one fund over another . Most advisors operate in that manner.

As far as the life insurance comment, this is just plain wrong if you get a good advisor to begin with. I almost always sell people the cheapest insurance policies because its the right thing to do, not because of the amount of commission I make. My entire goal is to do whats best for peoples financial goals...so that is a moot point.

I imagine that anyone who wants any longevity in the business, would have to always do the right thing. Those sales type FAs probably just started within a year and leave very soon afterward.

My personal opinion on FA's is that they provide people with a valuable service. Even Finance professionals need one eventually because there's not enough hours in a day/days in a week to manage a complicated person's financial assets optimally when they have 60-70 hours/week worth of work to do on top of family commitments.

Now to corporate bonds: Unless you have enough scratch to manage a diversified bond portfolio, buy a Bond fund. Corporates are good buys right now because there's still 'fear money' in treasuries and away from corporates keeping spreads historically high.

[Julio]

On a somewhat separate topic, how about provincial bonds? They have the upside of a higher rate, but still would seem to be more rock solid than a corporate bond. Of course one can't buy new Alberta issues, but how about other provinces?

[pepper24]

Originally Posted by Slava

Obviously you've just heard the bad, or dealt with bad advisors. The reality is that almost every mutual fund pays the exact same for me, so there is no incentive for me to push people to one fund over another . Most advisors operate in that manner.

As far as the life insurance comment, this is just plain wrong if you get a good advisor to begin with. I almost always sell people the cheapest insurance policies because its the right thing to do, not because of the amount of commission I make. My entire goal is to do whats best for peoples financial goals...so that is a moot point.

Good to hear especially regarding the life insurance portion. I hate whole/universal life insurance (they are the Oilers of my investment world ) and would only recommend term insurance if I was an advisor.

[L505]

Originally Posted by Finner

Joe Everyman can buy corporate bonds. On most online trading sites you can purchase them. In fact I have no idea why anyone buys GIC's and make 2 percent when you can pick up a TD or Bell bond that pays 5 percent. Especially if you're young.

Especially one might consider that GIC's are not 2 percent, but 4.55 percent. Consider for example Maxa Financial.

[Shazam]

Too bad we don't have tax-free municipal bonds like in the US.

Anyhoo, if you're interested in high-yield (*cough*junk*cough*) bonds, take a look at http://us.ishares.com/product_info/f...erview/HYG.htm

Junk bond rates are as high as 18% right now.

[macker]

Originally Posted by Shazam

Too bad we don't have tax-free municipal bonds like in the US.

Anyhoo, if you're interested in high-yield (*cough*junk*cough*) bonds, take a look at http://us.ishares.com/product_info/f...erview/HYG.htm

Junk bond rates are as high as 18% right now.

Be careful with any investment with junk in it's name. The herd is piling into corporate bonds so maybe it is time to be cautious here. Consider that today, the gap between where loans trade and where bonds trade is the highest since May 2005. This gap highlights the poor outlook for corporate bonds. This is the result of "a lethal cocktail of falling equity and bond prices and poor economic news. If you want to look at Corporate bonds I would look company by company and make sure you are comfortable with each position. With funds or etf's you may be getting what Warren Buffett refers to as deworsification in this example. Also be careful holding funds or etf's that are denominated in US as our currency will appreciate vs the US over the next 1-3 years in my opinion.

[Shazam]

If course you should be careful That's why they're junk.

[macker]

Originally Posted by Shazam

If course you should be careful That's why they're junk.

Not going to cut and paste it but if you click on the link you will see the top 10 holdings of HYG and rates of return for the ETF and they don't reflect the junk bond rates of return that you were suggesting so why not be cautious and look at bonds in the same way you look at stocks on a case by case basis. ETF's can sometimes be cheap but full of junk

http://finance.yahoo.com/q/hl?s=HYG

[Shazam]

Originally Posted by macker

Not going to cut and paste it but if you click on the link you will see the top 10 holdings of HYG and rates of return for the ETF and they don't reflect the junk bond rates of return that you were suggesting so why not be cautious and look at bonds in the same way you look at stocks on a case by case basis. ETF's can sometimes be cheap but full of junk

http://finance.yahoo.com/q/hl?s=HYG

Oh yes, I knew that. I was being mostly flippant.