Are You Missing Out on Fixed Income Opportunities?

What Discount Brokers and 401(k)s Won’t Tell You About Bonds

Let’s be honest: when was the last time you got excited about bonds? For most investors, “fixed income” sounds about as thrilling as, well, eating ramen noodles for dinner every night. But what if I told you that most investors are missing out on a world of opportunity-simply because they’re only seeing what their 401(k) or discount broker wants them to see?

Today, let’s pull back the curtain on fixed income and ask: Are you settling for less, just because you’ve been told that “fees are bad” and “cheap is best”?

Why “Lowest Fee” Isn’t Always the Best Deal

We’ve all heard it: “Never pay more than you have to!” But think about it-when you buy a car, do you automatically pick the cheapest one on the lot? When you shop for groceries, is your cart filled with nothing but instant noodles and expired yogurt? Of course not! You know there’s more to value than just price.

Yet, in the world of investing, we’re bombarded with the idea that all fees are evil, and that the only investments worth owning are the ones with the lowest expense ratio. But here’s the twist: sometimes, paying a little more can mean getting a lot more in return8.

The 5-Year Fixed Income Showdown

Let’s look at how some popular fixed income funds have performed over the last five years-net of fees, including all those important distributions. (Because, yes, fees matter. But so does what you get for them!)

*NTBIX 2024 return is an estimate based on YTD and distribution data.

Sources: BlackRock, Vanguard, Capital Group, Janus Henderson, First Trust, Cliffwater, Morningstar, Dividend.com.

What Do These Numbers Tell Us?

• AGG and Vanguard Total Bond: These are the “plain vanilla” options, with rock-bottom fees. But look at 2022-double-digit losses! Over five years, their average annual returns are slightly negative, despite the low cost.

• American Funds Bond Fund of America: Slightly higher fee, but consistently better performance, especially in positive years.

• NTBIX: Higher fee, but this fund has delivered positive results even when the “cheap” funds struggled, especially in tough years like 2022 and 2024.

• JBBB: This CLO ETF stands out at over 34% total return in five years, with a moderate fee.

• FPEI: Preferred securities can be volatile, but FPEI delivered a respectable 17.5% total return.

• CCLFX: The star of the show-yes, it has a higher fee, but a whopping 47.1% total return over five years.

The Takeaway

If you only look at fees, you miss the bigger picture. Some funds, SMAs and money managers with higher fees could have higher returns, or higher returns per unit of risk when markets get rocky. And many of these funds aren’t even available in your 401(k) or through discount brokers.  

Why Are These Opportunities Missing from Your 401(k)?

Here’s the kicker: most 401(k) plans and discount brokers only offer a narrow slice of the fixed income universe. If they showed you all of your options, it would be overwhelming.  (and most likely delay or negatively impact you from making any investment decisions.) They tend to stick to the plain-vanilla options-often the ones with the low fees, but not necessarily the best returns.  The goal of the 401(k) is to protect the plan sponsor from risk.  The more specialized, higher-performing funds? You’ll rarely find them in any retirement plan menu.

Why? Because researching, selecting, and monitoring these funds takes work. It takes expertise. And it takes someone willing to do the homework-not just once, but year after year.

Let’s Ask the Big Questions

• Are you willing to settle for “cheap,” even if it means leaving money on the table?

• Who’s looking out for your portfolio when the market changes, or when new opportunities arise?

• Would you rather pay a little more for a fund that delivers real value-or save a few bucks and get stuck with underwhelming results, built on an outdated allocation strategy?

The Value of a Real Advisor

This is where a knowledgeable advisor can make all the difference. At Sterling Edge Financial, our job is to do the homework for you: to sift through the endless options, find the hidden gems, and help you build a fixed income portfolio that actually works for your goals and risk tolerance.

Because in investing, as in life, you get what you pay for. And sometimes, paying a little more is the smartest move you can make.

Ready to look beyond the usual 401(k) menu and discover what you’ve been missing? Let’s start this journey together.

Contact Sterling Edge Financial today and let’s put your money to work-smarter.

Want to see how your fixed income strategy stacks up? Curious about what other options are out there? Reach out today or click the fund names above to get the latest info!

If you have more questions about bonds, 401(k)s, or how to get more from your investments, just ask!

Disclosure: The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision.  Past performance is no guarantee of future performance.  Investing involves risk of loss.

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Registered Representative, Securities offered through Cambridge Investment Research, Inc., a Broker/Dealer, Member FINRA/SIPC. Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Fixed insurance offered through James K. Lancaster. Cambridge and Sterling Edge Financial are not affiliated. Cambridge does not offer tax advice.