Why Should You Consider Bonds?
Why should you consider bonds for your investment portfolio? The primary reasons include:
Bonds add diversification to your portfolio. One strategy to help counter the effects of stock market volatility is to add investments to your portfolio that aren’t highly correlated with the stock market. Historically, stocks have a low positive correlation with corporate and government bonds.
Bonds offer fixed, periodic interest payments and the return of your principal at maturity. Thus, even in the event of a significant market decline, you receive some return in the form of interest payments, and you'll receive your principal at maturity.
Bonds are often better suited to short- and medium-term financial goals. If you need your money in a few years, you may not want to keep those funds in stocks, since a major stock market decline could occur when you need your money.
Most investors will hold stocks, bonds, and cash in their investment portfolios. How much you should allocate to the bond portion will depend on your circumstances, but over time that percentage is likely to change. For instance, young investors are likely to be more concerned with growth, so bonds may only make up a small percentage of their portfolio. On the other hand, those who are retired or close to retirement are likely to own a higher percentage of bonds, as safety of principal and a steady income stream become more important. In general, the percentage of bonds you own should increase as you become more averse to putting your capital at risk.
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This newsletter was prepared by Integrated Concepts Group, Inc. The opinions expressed in this newsletter are for general information only and are not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. The views expressed are those of the author and may not necessarily reflect those held by PlanMember Securities Corporation. Material presented is believed to be from a reliable sources and PSEC makes no representation as to it accuracy or completeness.