Markets

3 roles bonds can play in a portfolio

HelloLovely / Getty Images
HelloLovely / Getty Images

As many investors know, bond investing is not easy. In a previous blog post I had briefly touched upon how to sidestep the most commonly made mistakes . Today I want to dig more into the first of the three mistakes-forgetting what your fixed income investment is for. Why do investors own bonds anyway? After all, we know bonds generally offer lower returns than stocks over time. Investors I talk to point to three things:

1. Diversify equity risk

diversification correlation interest rate risk

2. Generate income

credit risk

3. Preserve principal

credit event

Mix and match

Bond investing goals

chart-mix-and-match-v2

Income and diversification

Income and principal

Diversification and principal

Matt Tucker , CFA, is the iShares Head of Fixed Income Strategy and a regular contributor to The Blog . Learn more about how consistent investment performance and low fees are critical to achieving your fixed income goals in today's environment.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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