{"id":202029,"date":"2017-07-16T12:50:06","date_gmt":"2017-07-16T16:20:06","guid":{"rendered":"https:\/\/metroactive.org\/wordpress\/?p=202029"},"modified":"2017-07-16T12:50:06","modified_gmt":"2017-07-16T16:20:06","slug":"the-new-face-of-fixed-income","status":"publish","type":"post","link":"https:\/\/metroactive.org\/wordpress\/2017\/07\/16\/the-new-face-of-fixed-income\/","title":{"rendered":"The New Face of Fixed Income"},"content":{"rendered":"
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BY INVESTORS GROUP \/\u00a0JUNE 2017<\/span><\/span><\/p>\n<\/div>\n

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For the last 30 years bonds have helped boost portfolios. With fixed income prices now falling, it\u2019s time to rethink how these assets fit in a portfolio.<\/p>\n<\/div>\n

You might remember the 80s for its funny hairstyles, tight jeans and a variety of new-wave music. What may not come to mind is the start of a deflationary period that has created many happy bond investors.<\/p>\n

Fast forward 30-plus years and the landscape is somewhat different \u2013 although funny hairstyles, tight jeans and experimental music still remain, creeping higher interest rates and signs of an inflationary environment means that gone are the days of viewing bonds as the path to greater returns.<\/p>\n

So, then, what are they viewed as, and is there still a place for them in your portfolio?<\/p>\n

a changing role<\/h3>\n

Simply put, when interest rates rise, bond prices fall. This is because investors won\u2019t pay for a bond that has a lower interest rate, which ultimately decreases the value of the bond.<\/p>\n

Beginning in the early 1980s, bond yields began to move lower as the threat of inflation subsided. This allowed investors to enjoy a combination of high current income and strong capital gains without much volatility \u2013 a trend that has been in place for several decades.<\/p>\n

But now, with bond yields rising, fixed income prices are falling. As a result, their purpose in your portfolio is changing.<\/p>\n

\u201cThe role that fixed-income plays going forward is really as a diversifier,\u201d says Les Grober, Senior Vice-President and Head of Asset Allocation with Investors Group. \u201cOne of the big reasons investors still want to own bonds in their portfolio is that the correlation between bond prices and stock prices is still negative.\u201d<\/p>\n

Since bonds and stocks tend to move in different directions, from a diversification standpoint, owning bonds in your portfolio can reduce its overall volatility.<\/p>\n

\u201cBonds still provide a safe-haven,\u201d says Grober. \u201cThey\u2019re there to preserve capital, and provide diversification benefits and dampen down one\u2019s volatility in a portfolio. That\u2019s a significantly different role than what they\u2019ve played in the past.\u201d<\/p>\n

value of diversification<\/h3>\n

Steve Rogers, Investment Strategist with Investors Group Investment Management, highlights the value of this type of diversification.<\/p>\n

\u201cThere\u2019s always value in low correlation assets within a portfolio,\u201d says Rogers. \u201cCombining assets to improve returns, without increasing your risk, is key.\u201d<\/p>\n

a changing sentiment<\/h3>\n

Changing one\u2019s view of the role fixed-income has been playing, from a portfolio booster to a diversifier can be a challenge for some investors, but adjusting your investment choices so they adapt to the current climate is important.<\/p>\n

\u201cWe\u2019re likely in the very early innings of an inflationary environment,\u201d says Grober. \u201cThere\u2019s big question mark about what that looks like and how we get there, but most people would agree that the deflationary risk we\u2019ve been fighting since the financial crisis is ending.\u201d<\/p>\n

The new role that bonds can play in your portfolio is a good place to start, and advice from your financial advisor can help you make the decisions that are right for you.<\/p>\n","protected":false},"excerpt":{"rendered":"

BY INVESTORS GROUP \/\u00a0JUNE 2017 For the last 30 years bonds have helped boost portfolios. With fixed income prices now falling, it\u2019s time to rethink how these assets fit in a portfolio. You might remember the 80s for its funny hairstyles, tight jeans and a variety of new-wave music. What…<\/p>\n","protected":false},"author":26,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-202029","post","type-post","status-publish","format-standard","hentry"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/posts\/202029","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/users\/26"}],"replies":[{"embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/comments?post=202029"}],"version-history":[{"count":0,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/posts\/202029\/revisions"}],"wp:attachment":[{"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/media?parent=202029"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/categories?post=202029"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/metroactive.org\/wordpress\/wp-json\/wp\/v2\/tags?post=202029"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}