“If you are moving out of bonds into something else, all of those other strategies come with different and potentially greater risk than the bonds you are leaving,” Philips said. “The minute you try to replace fixed income with stocks, they will start performing like stocks because stocks never are and never will be bonds.”
While there is nothing wrong with squeezing out a little more return through alternative assets, analysts and advisors are concerned that investors are taking on greater risk.
“We’ve seen over the past couple of years a lot of investors moving out of traditional fixed income and into things that have increased duration exposure and interest rate exposure,” Philips added. “If you’re making that move out of bonds and into stocks, you better expect tremendous volatility.”
For more information on fixed-income assets, visit our bond ETFs category.
Max Chen contributed to this article.