Fixed income in page

 

On the hunt for income, liquidity and diversification? (What investor isn’t?) It’s tough to find in a single bond. Find out more about creating a sophisticated mix, and other insights to help you make the most of investing with bonds:

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Remember the three benefits.

It used to be that bonds paid an acceptable income, had low transactional costs (making for high liquidity) and offered protection against falling equity markets (providing diversification). Currently, it is very difficult to get all three of these attributes in one bond, so investors must mix-and-match. Get in touch if you want to know how to approach prioritizing one attribute over the other, and how this could be complemented by a well-constructed financial plan that reflects your exact needs.

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Bond prices make a difference, specifically in taxable accounts.

Investors that use bonds in their taxable accounts should be tax-aware of their holdings by considering both the yield and the price of the bond before investing, or holding onto a security. For example, there may be opportunities to switch away from your current holdings in order to increase the after-tax yield of your portfolio. Get in touch to find out more.

 

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Credit ratings remain an effective tool for most investors.

Despite a lot of criticism over the past decade, credit ratings continue to offer the following basic rule of thumb: the lower the credit rating of the bond, the more likely it will act like equity markets as and when they fall. This is true whether the bond has a lower credit rating due to the quality of the borrower, or due to the specific characteristics of the particular bond, i.e. subordinated ranking. Just because something is labelled fixed income doesn’t mean it is low risk.