An Active Fixed-Income Investing Strategy Built to Outperform Bond Funds

Maximizing Total Return vs. Passive Index Tracking

Bondsavvy's Bond All-Star Team

We seek to maximize the total return of every corporate bond we recommend. We have narrowed down the vast corporate bond universe from over 10,000 bonds to a select, curated list of bond recommendations we believe can outperform bond funds and a bond's purchase-date yield to maturity.

We identify bonds that offer high yields relative to their risk. We also seek to maximize total returns by recommending undervalued bonds that can appreciate in price. We update our buy/sell/hold bond recommendations each quarter based on quarterly financial results, US Treasury yields, economic conditions, and other investment considerations.

Every time we update our bond recommendations, we are making our list of recommended corporate bonds better. In short, we seek to create a corporate bond All-Star team.

In Figure 1, we show how Bondsavvy recommendations have outperformed the iShares corporate bond ETFs for our 92 exited bond recommendations. We have outperformed by 2.79 percentage points on an annual return basis. Of the 92 bonds, we have outperformed for 63% of the picks, including 23 bonds where we outperformed by at least 10 percentage points.

Figure 1: Investment Performance of Bondsavvy's 92 Exited Bond Recommendations vs. iShares Corporate Bond ETFs

Sources: iShares website and Bondsavvy calculations.

View our corporate bond returns page to see the performance of all previous Bondsavvy investment recommendations. Past performance does not guarantee future results.

Bush League Bond Funds

Bond index funds and ETFs such as Vanguard Intermediate-Term Corporate Bond ETF (VCIT) are very different. These funds do not identify bonds that can outperform. Rather, they follow an index that includes thousands of bonds.

Having a portfolio of thousands of bonds results in muted returns. These funds might own some good bonds, but if you own thousands of bonds, the performance will be average at best. If a manager of a baseball team had to play thousands of different players on his team, no doubt, it would be a Bush League team, similar to Bush League bond funds.

These bond funds and ETFs can also do some pretty silly things. Recently, both Vanguard VCIT and iShares LQD elected to have Micron Technology bonds they owned redeemed by Micron as part of a tender offer. They were under no obligation to sell, but they did so to ensure "liquidity" of their holdings and index conformity.

Micron has the best financials of just about any company in the United States as of mid-2026. As they sold Micron Technology bonds, they held on to myriad Big Tobacco bonds. To dump Micron bonds while holding Big Tobacco bonds proves that bond funds are indeed the dumb money.

Ability to Assess Relative Value

Investors can assess the value of corporate bonds by analyzing the financials of issuing companies and comparing an issuing company's bond price, YTM, and credit spread to those of other bond issuers. Individual bond investors are further aided by individual corporate bonds trading as a percentage of their $1000 face value. Evaluating issuer financials, yield-to-maturity (YTM), and credit spreads is central to creating a successful bond investing strategy that can outpace inflation.

Investors cannot assess the value of bond funds and ETFs since they lack underlying financials, a fixed coupon, a maturity date, and trade off a fund's net asset value per share. Fund net asset values per share vary for each fund, which eliminates the ability for investors to apply anything in their investor tool kit to assess the value of these investments.

Fixed Coupon Income vs. Bond Fund Variable Distributions

Individual corporate bonds have fixed coupons that contractually pay investors coupon interest every six months. On the other hand, bond fund distributions are variable, which makes it impossible for bond fund and ETF investors to know what future income they can expect.

As we like to say, "bond funds and ETFs take the fixed out of fixed income."

Some of Bondsavvy's most successful investments have been when we recommended bonds with high coupons that also achieved strong capital appreciation.

Active Fixed Income Investment Strategy with Regular Updates

To maximize total returns, we carefully monitor the prices of our recommended bonds and the financial performance of our bond issuers. We then update our buy/sell/hold recommendations through quarterly investment webinars in addition to subscriber emails.

When we believe a bond's future return is not compelling relative to other available bonds, we will typically recommend selling such bonds. We typically do not hold bonds to maturity and do not believe in bond ladders as a fixed income strategy.

Highly Selective Investment Recommendations

The over-diversification provided by large bond funds and ETFs reduces returns and is not needed by many investors.

We are partial to Warren Buffett / Charlie Munger “focus investing,” where we concentrate investments on the best opportunities. We typically have 60 to 65 bonds on our buy/hold list of recommended corporate bonds.

The ability to be selective is one of the biggest advantages of individual corporate bonds vs. bond funds. Our investment analysis identifies a select number of corporate bonds we believe can achieve higher investment returns than the leading bond funds. While large bond funds will own some good bonds, the returns of these good bonds are often diluted by the lower returns of hundreds or thousands of other bonds in the portfolio.

Unbiased Investment Recommendations

Bondsavvy recommends individual corporate bonds based solely on their merits and our corporate bond research.

This is in contrast to full-service brokers that hold bonds in their own inventory and then sell you their bonds, earning them fees on the bid-ask spread plus any markup or markdown they charge investors. We charge a flat Bondsavvy subscription fee and are not incentivized by the size or frequency of subscriber transactions.

We believe this part of our fixed income investment strategy has been a big reason why we have achieved higher investment returns than bond funds and ETFs.

Flexible Investment Holding Period

Our goal is to maximize the income and total return of every corporate bond we recommend. Achieving this goal can impact the length of time we recommend holding our corporate bond picks.

There can be rare cases when we have a short holding period, such as when Tiffany announced it was being acquired by LVMH. In this case, the deal announcement caused our recommended bonds to increase 25 points. To lock in our 26% investment return, we recommended selling the Tiffany bonds only four months after our initial recommendation date.

More likely, however, is that we will recommend holding our bond picks over a period of years so our subscribers can benefit from the strong income our recommended corporate bonds can generate. Read our when to sell bonds blog post to learn the factors impacting when we decide to sell previously recommended bonds. You can also view our Performance page to see the holding periods of our past corporate bond recommendations.

Empower Subscribers to Invest in Bonds Online

Bondsavvy is the leading expert for recommending individual corporate bonds to individual investors. We recommend subscribers invest in bonds online through brokerages such as Fidelity, Schwab, and E*TRADE to take advantage of their wide bond inventories, competitive prices, and low transaction fees.

While online brokerages have enabled individual investors to transact at prices at or near the world's largest bond funds, investors still have to select from over 10,000 individual corporate bonds available on retail brokerages. This is a daunting task for most individual investors, and one of the key problems we founded Bondsavvy to solve. Corporate bond ratings do not advise on whether a bond is a good investment, so their value is questionable. Bondsavvy is a step up. We take the guesswork out of bond investing by providing thoroughly researched corporate bond recommendations that have beaten the world's largest bond funds and ETFs.

Read our fixed income blog post to learn more about the benefits of investing in bonds online.

Recommend Bonds That Can Achieve Higher After-Tax Returns Than Muni Bonds

We believe, for US investors, our after-tax corporate bond returns have outperformed municipal bond investment returns. Given more frequent financial reporting and superior trade execution provided by corporate bonds vs. municipal bonds, we believe it is easier to identify corporate bonds that can increase in price and achieve strong total returns.

In addition, since many municipal bonds have onerous call provisions relative to investment grade corporate bonds, municipal bond tax equivalent yields are typically irrelevant.

Historically, the after-tax returns of our recommended bonds have often benefited from a meaningful portion of our returns being driven by long-term capital gains, which currently receive favorable US tax treatment compared to interest income.

Focused Individual Corporate Bond Expertise

Steve Shaw founded Bondsavvy in 2017 after a 20-year career in corporate mergers and acquisitions and bond trading technology. For the benefit of Bondsavvy subscribers, Steve combines his deep knowledge of corporate financial analysis with a strong understanding of investing in bonds online through brokerages such as Fidelity, E*TRADE, Schwab, and others.