3) What if I’m not ready to make my move? Your readiness for change will likely depend on a number of factors, including the current composition of your fixed income portfolio, your relative exposures to interest rate and credit risk, your comfort with your investment manager and, of course, your own time horizon and risk tolerance. If you want to move out of a position, but have nowhere to go…or nowhere that you’re comfortable with just yet, consider using exchange traded funds (ETFs) as a transition vehicle. Because ETFs are liquid and have low transaction costs, you can transition out of a worrisome position while still maintaining market exposure in the ETF as you do your due diligence in planning your next move.
Ultimately, headlines can be alarming and can stoke market volatility. But bonds have an important place in an investment portfolio. They provide ballast to your equity holdings, and stand as an important source of income. The uncertainty of the moment should not lead you out of this vital asset class, but instead encourage you to work with your financial professional to ensure you are using the fixed income markets to their fullest potential — and your greatest benefit.
Rob Kron, Managing Director, is the head of Investment and Retirement Education for BlackRock’s U.S. Wealth Advisory group. He provides practical information on topics that are important to every saver and investor of every age. You can find more from Rob here.