In cap-weighted bond indexes and funds, the governments and companies that typically receive the largest weights are those that issue the most bonds (by dollar value). This means investors own the governments and organizations that have the most debt on their books.
For this reason, bond indexes and funds are often criticized, says Dan Bortolotti in a recent column for Moneysense. We’ve been trained to see debt as a bad thing, he notes, but fixed income investors should understand that a country or company isn’t necessarily less creditworthy because it issues more debt.
Read more on how to help people understand bond funds.
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