6 Rules for Bond Investors

Bonds are an important part of investors' portfolios if approached in the right way, says Morningstar's Christine Benz

Christine Benz 12 November, 2019 | 9:46AM Tom Lauricella

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Many investors feel they should have bonds somewhere in their portfolios, but don't know how much they should allocate or whether to buy individual bonds or funds. They also struggle with some of the key concepts, and how long they should hold bonds for.

A smart allocation to bonds can make the difference between a portfolio with scary ups and downs that spook investors out of the stock market, leaving a retiree short of the money needed to pay bills, and a more stable and diversified portfolio that can deliver the outcome an investor needs.

1. Watch the Flipsides

Confusion often starts with the basic premise of bonds: bad economic news is generally good news for bond prices and vice versa. The recent popularity of bond funds can be put down to fears that the world economy is heading for a downturn, especially with the US-China trade war dragging on growth. If greed makes stocks go up and fear makes them go down, it is generally the opposite for bond prices.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Christine Benz

Christine Benz  is director of personal finance at Morningstar and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances.

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