A bond is defined as an interest-bearing certificate issued by a government or business, promising to pay the holder a specified sum on a specified date.
Common wisdom says bonds are a safe haven from stock market turmoil. Does that mean you should buy bonds if that turmoil comes from recession or inflation?
Complicating the situation is the fact that there is no one-size-fits-all-situations bond. The Treasury Department issues bonds, so do corporations, municipalities and banks. There are short-term bonds and long-term bonds; bonds with pristine credit ratings and junk bonds.
Remember, while bonds may protect you in hard economic times from the deep dives that stocks sometimes take, there is no guarantee you won't lose money. With bonds, you can get hurt while standing on the sidelines.
Stability versus volatility
It's a given that most people, especially as they near retirement and need to reduce volatility in their portfolio, should have a smattering of bonds for stability and to provide fixed-income.
The ratio of bonds to equities and cash depends on your needs and your risk tolerance. We won't specifically address allocation in this article, but we will try to provide some guidance for when it's appropriate to load up a bit more on your bond allocation.
Common wisdom says bonds are a safe haven from stock market turmoil. Does that mean you should buy bonds if that turmoil comes from recession or inflation?
Complicating the situation is the fact that there is no one-size-fits-all-situations bond. The Treasury Department issues bonds, so do corporations, municipalities and banks. There are short-term bonds and long-term bonds; bonds with pristine credit ratings and junk bonds.
Remember, while bonds may protect you in hard economic times from the deep dives that stocks sometimes take, there is no guarantee you won't lose money. With bonds, you can get hurt while standing on the sidelines.
Stability versus volatility
It's a given that most people, especially as they near retirement and need to reduce volatility in their portfolio, should have a smattering of bonds for stability and to provide fixed-income.
The ratio of bonds to equities and cash depends on your needs and your risk tolerance. We won't specifically address allocation in this article, but we will try to provide some guidance for when it's appropriate to load up a bit more on your bond allocation.
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