Goldman Sachs Asset Management advises investors to shift from short-term cash instruments to longer-duration bonds, highlighting the attractive yields and diversification opportunities available in the bond market.
Goldman Sachs Asset Management believes it's not too late to shift investments from short-term cash instruments into longer-duration bonds. While investors have enjoyed strong yields on cash, which have recently dipped from their peak, bonds currently offer even better income potential. Lindsay Rosner, head of multisector investing at Goldman Sachs Asset Management, points out that 99% of investment-grade bonds now outpace cash yields, a significant jump from just 24% a year ago.
For example, the Goldman Sachs Access U.S. Aggregate Bond ETF, which tracks investment-grade bond markets, boasts a 30-day SEC yield of 4.50%. Rosner emphasizes that the opportunity to capitalize on bond yields is still very much alive. She calls it 'the time to start thinking about moving out on the curve,' meaning shifting investments towards longer-term bonds. This strategy, she explains, allows investors to secure a locked-in income stream and diversify their fixed-income portfolios.Rosner highlights the resurgence of 'term premium,' which means investors are now receiving greater compensation for holding longer-term bonds. She urges investors to move their holdings from cash or money market funds, where yields are lower, into longer-duration bonds to reap greater rewards. Diversification, she stresses, is key to achieving consistent and stable returns, and the bond market offers a wealth of investment opportunities beyond traditional fixed income. Rosner acknowledges the challenges posed by tight credit spreads, but believes active management is crucial in this environment. She advocates for thorough credit analysis to identify bonds with strong repayment capabilities that can thrive in a high-interest-rate environment.
INVESTMENT BONDS CASH YIELD TERM PREMIUM DIVERSIFICATION FIXED INCOME CREDIT SPREADS ACTIVE MANAGEMENT
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