Is now the time to revisit bonds in your portfolio?
It may be, given that the Federal Reserve is advocating a "patient" approach to interest rates and a survey by the National Association for Business Economics has found that about 50 percent of U.S. business economists believe the country will be in a recession by the end of 2020.
Yes, said certified financial planner Douglas Kobak, CEO of Main Line Group Wealth Management. Other factors working against rising rates, he said, are slowing global economic expansion, increasing U.S. stock market volatility and uncertainty in Washington in areas such as a U.S./China agreement, immigration, the national debt, lack of bipartisan support, etc.
The yield from a short-term bond portfolio currently can beat the rate of inflation, he said.
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"The right portfolio can add more safety, since individual bonds have a stated maturity date when compared to a mutual fund," Kobak said. "Investment-grade and government bonds also have a low correlation to the stock markets, which can lower the volatility within a portfolio.
"Bond funds and most fixed-income ETFs do not have set maturity dates," he added. "Therefore, in a rising interest-rate environment, there is no set date in the future when an investor will get his principal back."
Erika Safran, CFP, founder of Safran Wealth Advisors, said that "it's always time for bonds."
She added: "You just have to know why you are buying them. I find that a lot of the bond avoiders are alternative investments fans. I don't see the value."
Safran addde that there should be no fear of the bond market "unless, of course, you're investing on the long end or on low credit."