If you want a level of protection from a market decline, fixed income investments have traditionally been the solution. And, during times of volatility, it is no surprise that investors turn to bonds. However, this approach is not as safe as you may think.
Over the past 30 years, the Bloomberg Barclays U.S. Aggregate Bond Index (the “Agg”) returns averaged 6%. But today, it’s unlikely fixed income will generate such returns. Many industry leaders expect returns of 1%–3% in the coming years.
If the upside of a traditional core fixed income portfolio is limited, shouldn’t the tradeoff be more protection from the downside? It should be, but it isn’t. Why?
It's time to reevaluate fixed income investing. Let's get started.