Is There Any Alternative to Bonds?

Morningstar columnist John Rekenthaler wonders whether buying government bonds is the equivalent of stuffing your money under the mattress

John Rekenthaler 9 October, 2020 | 2:23PM

Scissors cutting a dollar note

Should bonds continue to be a part of the traditional 60/40 balanced portfolio, given their low yields and presumably low future returns?

That phrasing understates the matter. Ten-year US Treasuries now yield 0.70%. With the 10-year inflation rate expected to be 1.64%, the note’s miserly payout implies that if inflation meets investor expectations, the receipts from 10-year Treasuries will trail the rise in the cost of living by almost 1 percentage point per year.

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About Author

John Rekenthaler

John Rekenthaler  John Rekenthaler is vice president of research for Morningstar.

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