Corporate Cold Calling: Companies Try to Lure Investors With Bonds

This time, it's the companies -- not the investors -- that are following the money.

In June, equity mutual funds recorded net outflows of $11.1 billion, while taxable bond funds saw inflows of $11.4 billion, according to AMG Data Services. And corporate America has duly noted this shift.

Anxious to raise capital by any means, companies have begun to issue bonds targeted at the retail investor. (Generally, bonds are sold first to institutional investors, then to individuals on the secondary market.) Meanwhile, the National Association of Securities Dealers just launched the first-ever bond-quoting Web site, enabling the public to track corporate bond trades.

Now it's easier than ever for retail investors to jump straight into corporate bonds. Sounds great, right? Not so fast. Buying bonds isn't as easy as picking stocks -- and we've learned the hard way how difficult good stock-picking can be. Further, individuals are often at a disadvantage when buying bonds on their own, rather than through a fund. ...