Balance is as important in your portfolio as it is in riding a bike. For many investors, fixed income investments can help achieve the desired balance by helping reduce portfolio volatility and provide regular income.
Fixed income investments, including bonds, are an important component in reducing investment risk in your portfolio as bond prices and stock prices often move in opposite directions and bonds provide income. How you allocate your portfolio among stocks, bonds and cash will depend on your individual circumstances and financial goals as well as how much risk you are willing to take.
As part of the financial planning process, you’ll want to work with your Financial Advisor to develop an asset allocation plan customized to your needs. As your circumstances change over time, your Financial Advisor can work with you to adjust your asset allocation plan. For example, as you get closer to retirement, it may be important to increase your fixed income allocation to help reduce investment risk.
Investors can choose from a wide variety of taxable and tax-exempt fixed income instruments, including bonds issued by corporations, states, municipalities, FDIC-insured banks, federally sponsored agencies and U.S. Treasury securities.
Investors might select bonds for their portfolios for a number of reasons:
If your portfolio doesn’t include fixed income investments, talk with your Financial Advisor to determine what role these securities should play in your portfolio. If your investments do include fixed income securities, review your portfolio with your advisor on a regular basis to determine how current market conditions may affect your allocation mix and make the necessary adjustments.
Diversification does not assure a profit or protect against loss.
Robert W. Baird & Co. does not provide tax or legal advice. Please consult with your tax and legal professionals.
Article provided by Baird for the Pfeil Leatherwood Group at the Houston – Memorial City office of Robert W. Baird & Co., member SIPC. Rick Pfeil and Matt Leatherwood have 24 combined years of financial services industry experience, and can be reached at firstname.lastname@example.org