our emphasis on individual securities, we do feel mutual funds
sometimes make sense for client portfolios. We occasionally
recommend them for exposure to international markets, or to
target particular sectors or countries. ETFs (Exchange-Traded
Funds) are especially useful for this. We also recommend mutual
funds for client portfolios that are too small to obtain adequate
diversification from individual securities.
I. It enables us to personalize investment portfolios to better match the
and desired risk level of the client. For example,
a client may favor a socially
that is tailored to exclude certain industries (e.g.
can focus more precisely on exciting growth opportunities,
and react faster to those opportunities.
III. We avoid the significant
fees embedded in all mutual funds (both load and no-load
Annual mutual fund expenses
average around 1.5% annually for equity funds and about 1.1% annually for bond
funds. Mutual fund
companies extract these fees from the fund portfolios before
investment returns are calculated, so the fees often go unnoticed by investors.
IV. Individual securities are more
tax efficient than mutual funds. Large capital gains can be deferred
indefinitely, whereas mutual funds are required to pass along
taxable capital gains distributions annually.
At Bon Investments, most of the
investment portfolios we manage are predominantly comprised of individual
securities. We select, monitor, and decide when to sell
securities for clients. We generally prefer investments
in individual securities over mutual fund investments for the
Bon Investments, we contribute 5% of our net income to charitable causes