We think investors should remain
diversified in their bond portfolios and resist the temptation to change allocations based on news headlines or whimsical economic flavors of the month.
Instead, consider investing on a more conservative basis (perhaps using a balanced portfolio — or even
investing in a bond portfolio, like our Flexible Income portfolio).
Maintain Individual Bond Positions The simplest way to avoid
losses in your bond portfolio in a period of rising interest rates is to buy individual bonds and hold them to maturity.
Thanks to lackluster global growth, and rock - bottom interest rates in the United States — and even negative rates in other parts of the world — investors face the choice of either accepting lower income or increasing risk
in their bond portfolios in the search for yield.
We still see a role for
credit in bond portfolios but, overall, prefer to take economic risk in equities, as reflected in our recent downgrade of U.S. credit.
The ETF won't be able to invest in derivatives due to regulatory constraints, while Gross at Total Return Fund is known for his use of
derivatives in the bond portfolio.
A recent survey of institutional investors in Australia found that exposure to credit risk had increased in the first half of 1999 and that about half of the respondents intended to take on additional credit risk
in their bond portfolios over the remainder of 1999.
But in the last few episodes of sharp stock market drops, bonds went up (US government bonds are a safe haven asset and appreciate in crisis periods) so the only thing better than 3 months worth of expenses in a money market fund is having 3 + x months worth of
expenses in the bond portfolio due to higher bond yields and negative correlation between bonds and stocks.
Oversimplifying, that means excluding unrealized
gains in its bond portfolio and excluding the value of its deferred tax asset (because of historical losses, AIG won't be a cash taxpayer for years).
The income generated from bonds is still historically low, and with bond prices falling as rates slowly rise, the mark - to -
market in bond portfolios is likely to be less than stellar.
Back to what I said earlier — when I said bond returns are often scrutinized, what I mean it that what would be considered a small change in the performance of an equity portfolio is a much larger
difference in a bond portfolio.
Thew book takes you through what you would do in order to preserve purchasing
power in a bond portfolio through a crisis where there are significant municipal defaults amid inflation.
Paul J. Lim's June 30, 2012 New York Times article, «Searching for Calm in the Bond Markets,» shows how investors can limit
volatility in their bond portfolios, and the article's conclusions are right in line with our low volatility approach to fixed income investing, our Flexible Income strategy.
Incorporating bonds
in a bond portfolio helps you to preserve wealth, diversify assets, generate income and manage the risk of fluctuating interest rates.
TIPS can provide some protection against unexpected inflation, and is widely -
used in bond portfolios to diversify interest rate risk.
This is what we
do in the bond portfolios we manage: we invest in world bond, strategic and high yield funds, but we only invest a small portion of our portfolios in these funds.
We still see a role for
credit in bond portfolios but, overall, prefer to take economic risk in equities, as reflected in our recent downgrade of U.S. credit.
Using the weights in the above example, a combination such as this can be classified as «intermediate treasuries»
in a bond portfolio.
After reducing interest rates to near zero during the recession, the Fed has finally raised those interest rates, which has wide - reaching implications for investors — particularly
those in bond portfolios.
In our bond portfolios, we use a proprietary system of default risk for our bond holdings called Maximum Loss.
In bond portfolios, it's duration, duration, duration.
Bonds: Staggering the maturities
in your bond portfolio can efficiently balance interest rate risk and reinvestment risk.
And if you look at what is
in that bond portfolio, and you guys can go do screens yourself, but there's portfolios that have 2 and 3 percent, or 2 - and 3 - years durations on their portfolio, that have more than 50 percent of the portfolio in bonds that are out 15 - plus years.
In your bond portfolio, use an emerging market, sovereign - debt portfolio.