In the world of fixed income, it’s crucial to recognize that not all bonds are cut from the same cloth. Investors typically invest in bonds for three primary reasons: safety of principal, income generation, and diversification from equities. It’s this diversification aspect that holds particular significance for long-term investors.
However, as we move down the capital structure, bonds begin to shed their diversification attributes and adopt a risk profile akin to equities. Overexposure to these riskier segments of the fixed income market can prove perilous, especially during periods of equity market turbulence.
High yield debt, for instance, should serve as a diversifier rather than a core holding and should be wielded tactically rather than constituting a substantial portion of a portfolio.
Let’s navigate the complexities of fixed income together and tailor a strategy that aligns with your investment objectives and risk tolerance. Don’t hesitate to reach out—we are here to help you chart a course to financial success.
