In the current rising rate environment, a number of financial advisors are suggesting investors to treat fixed income like the sun and limit prolonged exposure. In this case, as the Federal Reserve’s predilection for raising interest rates does not appear to be changing anytime soon, it’s best to take advantage of these short-term rate adjustments by limiting duration.
In the current economic landscape, Collin Martin, director of fixed income for Charles Schwab’s Schwab Center for Financial Research, is advising bond investors to avoid fixed-income investments with long-term yields in the interim.
“For now, I still think investors should focus on short-term fixed income. I don’t think the risk/reward makes much sense to extend the duration,” said Martin. “For now, shorter-term investments are offering higher yields, but in case yields do rise, I’m telling clients to get closer to the point where it makes sense to start extending duration.”