Saying that it is not cost-effective to buy less than $5,000 worth of Treasury or corporate bonds or less than $10,000 worth of municipals, a new Charles Schwab report recommends bond funds over individual bonds for most investors.

In order to build a diversified portfolio of at least 10 different issues, an investor would need a basket of $50,000 of corporate bonds and $100,000 of municipals. By comparison, an investor automatically receives diversification and professional management by buying a bond fund, according to Schwab. However, for investors who want the certainty of a fixed level of income and who prefer a defined maturity date, individual bonds may be a better choice, according to the report.

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