Having a diversified portfolio means you should have some of your money in bonds. Here's what to know
Bonds can not only offer some protection against market volatility, but they also generate income.Having a diversified portfolio means you should have some of your money in bonds. The assets can offer not not some protection against market volatility, but also generate income.
If you're going this route, ladder the bonds — which means staggering maturities — to meet your specific time goal, he said. Yet price alone isn't a barometer. Investors should be aware of interest rate risk, which is the impact of interest rate changes on the asset's underlying price. The best way to assess this is through the bond fund's"Those investment-grade bonds, high-quality bond portfolios tend to offer the greatest diversification benefits relative to the equities in your portfolio," he explained.
"Look at the track record, but don't rely on it," Failla said. Also look at the default rate, how long the managers are tenured with the funds and what their process is for selecting assets, he added. "Even within those categories, just mak sure they're diversified strategies, mainly investing across … investment-grade government-backed securities, corporate-debt securities and securitized-debt securities," he said."If you're throwing a dart at the category, maybe you're better off picking a passive strategy," Mulach said.can be a great option to simply replicate that index, he said.
Failla thinks they are a good investment right now. He sticks with actively-managed high-yield funds for his clients.
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