How to Construct Your Fixed-Income Portfolio

This column was originally published on RealMoney on March 30 at 10:33 a.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Lately, several readers have asked about fixed-income portfolio construction. The nuts and bolts of this do not get discussed very often, and while I don't have all the answers by any means, a look over my shoulder might be worthwhile for some folks.

As with equity investing, it makes sense to capture different segments of the market and be willing to use different tools to get the job done.

Reducing Volatility, Adding Yield

Most people think about owning bonds for the income, and this is valid, but fixed-income instruments can also reduce volatility and add a little yield to the overall portfolio, even if there is no intention of taking income out. This could reduce returns somewhat, but it also reduces volatility, and that will appeal to some investors. ...