Leave bond picking to the pros

Diversifying the fixed-income portion of your portfolio means going beyond Government of Canada bonds. But choosing what to buy is tricky business—arguably trickier than picking stocks.

That’s because the documents that explain the terms of the debt agreement—called covenants—are extremely complicated, and usually contain nuances and loopholes only a trained eye can spot. Misreading this fine print can be costly.

“It’s highly unlikely that someone who didn’t spend hours reading covenants would have a good understanding of a bond’s risks,” says Heather McOuatt, a portfolio manager at Franklin Bissett Investment Management in Calgary.

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