Bonds Still Vital to Portfolio
07/14/08 - 11:55 AM EDT
A sluggish economy combined with low interest rates makes things challenging for investors. Stocks aren't looking great -- they're down about 20% from their early October highs -- so many investors are wary of putting their money in equities. Yet, yields from fixed income investments remain low due to historically low interest rates. Faced with this situation, many investors try to chase higher returns, either in the form of the latest hot stock pick, or higher yielding bonds. That's not always the best move, according to Greg Shultz, a principal at Asset Allocation Advisors, a financial planning firm located in California. Instead, he says, the solution is to keep to a well-balanced, diversified portfolio -- meaning, one that includes an appropriate mix of both stocks and bonds. Bonds generate interest that will supplement your returns during a down market, and since bond prices are much less volatile than stock prices, bonds also keep your portfolio from plummeting if the stock market tanks. "Truly great track records are not created in up markets, they're done in a down market," says Shultz. "By lowering your losses on a down market, you protect your capital and are better positioned to take advantage of a recovery." Here's an example of how bonds can protect your assets during a stock market decline. The S&P 500 fell 9.45% YTD during the first three months of this year. An asset allocation account from Schwab(SCHW - Cramer's Take - Stockpickr) that aimed for 80% stocks and 15% bonds (the remaining 5% was in cash) declined only 7.55% over the same period.
The Web has a lot of bad medical advice. Here are some things to consider when you're surfing for a cure.
Try to get the financing that costs you the least amount of money.
Obama wants to give breaks to some struggling people, but those who go through the process take a long time to recover.
These forgotten Internet stocks are being accumulated by hedge funds.
Raspberries for Apple; You'll be sorry, UBS; Fortress or Fort Knox? Wholly unappetizing Foods; give Liberty AOL or give them...
The GOP presidential candidate raised $27 million in July.
Some credit and debit cards give you some cash back on purchases. But you need to manage it well to benefit from it.
Sponsored by:




