Bond funds offer greater diversification than purchasing individual bonds, reducing risk exposure.
Why is Option B Correct?
Broad diversification → A bond fund spreads investments across multiple issuers, reducing default risk.
Professional management → Bond fund managers actively manage interest rate risk and credit risk.
Why Not Other Options?
A (Greater income) → Bond funds do not always provide higher income than direct bonds.
C (Lower charges) → Bond funds may have management fees that individual bonds do not.
D (Exact match to client needs) → Individual bonds may be better suited for specific income needs.
???? Reference: CFA Institute (Fixed Income Investing), CISI Wealth & Investment Management.
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