For the majority of Americans, stocks and bonds represent the two asset classes anchoring an investment portfolio. There is also real estate, perhaps some alternative investing and maybe collectible items that carry significant value. But at the end of the day, the performance of stocks and bonds will drive the overall wealth of investors in the financial markets.
The bond markets are vast and diverse, encompassing everything from risk-free Treasury bonds and tax-advantaged municipal bonds to investment-grade corporate debt and riskier, high-yield and emerging market bonds.
Just how much of the bond landscape you want to sample is a matter of personal inclination and tolerance for risk. The range of opinion in the financial advisor community on the role of fixed-income investments and how to effectively construct bond portfolios is similarly diverse.
Some primarily use bonds to balance the risks they take in the stock market. They want no surprises from their bond allocations, so they stick with Treasurys and investment-grade bonds. Others take a more expansive view of the bond markets and are willing to take on risk to find more return from fixed-income holdings.
Virtually all financial advisors, however, consider bonds an essential part of any diversified investment portfolio.
CNBC spoke to three advisors about how they use bonds in their client portfolios.
Investment strategy advisor, Buckingham Strategic Wealth and BAM Advisor Service
Brian Haywood likes to keep his investments in bonds simple. "We think of fixed income as the bedrock of a client's portfolio," he said. "It is there to preserve and protect wealth as opposed to growing it."