Additionally tiny portfolios can only achieve levels of proper diversification through commingled investment accounts. However after having carved out these three rather small exceptions the balance of any fixed income investments should be done in the bonds themselves. The reason for this is that commingled accounts such as mutual funds must be managed in accordance with needs of the fund and not your client. Purchases and liquidations are often made in reaction to inflows and outflows of available cash. These transactions cause tax consequences for your client.
Commingled funds lack investment control, dividend certainty and any maturity date.
In order to overcome this obstacle fund managers are forced to make market bets and integrate lower quality issues. The result is that most funds lag the market. Simple, basic investment in investment grade bond portfolios that are laddered will provide certainty as well as a greater yield that is unburdened by fees. Maturing bonds do not cause tax headaches. If possible, take back control of the performance by ridding the portfolio of such commingled funds such as mutual funds that burden performance with fees and cause these involuntary occurrences.