Choose your bonds wisely. There are still very few bargains out there for people buying bonds, and some areas of the bond market are more vulnerable to rising rates than others. This means it’s especially important to do your homework and choose your bonds wisely.
For instance, shorter maturity Treasuries, those with durations of two- to five-years, are likely to be more vulnerable to rising rates than their counterparts with longer durations. In addition, with most traditional areas of the bond market looking expensive investors should consider a flexible, go-anywhere approach. Finally, investors should give munis another look, if they haven’t already, as I explain below.
Keep munis in mind. While no longer cheap per se after their extraordinary run in 2014, municipal bonds continue to look attractive versus both Treasuries and corporate bonds. For instance, yields for longer-maturity munis rival or exceed those of their taxable counterparts on a before-tax basis, and this only increases the after-tax value.
Go beyond traditional stocks and bonds. Finally, it’s worth considering incorporating non-traditional, or alternative, strategies into your investing arsenal. With such investments, you can potentially enhance diversification and amplify your portfolio’s growth potential.
For more about these moves, and what to expect for the remainder of 2014, be sure to check out the full piece, “The List: What to Know, What to Do – Fall Update.”
Source: BlackRock research
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.