Bond Investment Strategies
Strategies for bond investing range from a buy-and-hold approach to complex tactical trades involving views on inflation and interest rates. As with any kind of investment, the right strategy for you will depend on your goals, your time frame and your appetite for risk.
Fixed income securities can help you meet a variety of financial goals such as: preserving principal, earning income, managing tax liabilities, balancing the risks of share investments and growing your assets.
This section can help you:
- Understand where bonds fit within your asset allocation
- Learn about different types of bonds
- Think about sophisticated trading strategies based on market views and signals
- Discern the differences between bonds and bond funds
Your goals will change over time, as will the economic conditions affecting the bond market. As you regularly evaluate your investments, check back here often for information that can help you.
The way you invest in bonds for the short-term or the long-term depends on your investment goals and time frames, the amount of risk you are willing to take and your tax status.
When considering a bond investment strategy, remember the importance of diversification. As a general rule, it’s never a good idea to put all your assets and all your risk in a single asset class or investment. You will want to diversify the risks within your bond investments by creating a portfolio of several bonds, each with different characteristics. Choosing bonds from different issuers protects you from the possibility that any one issuer will be unable to meet its obligations to pay interest and principal. Choosing bonds of different types (government, sub-sovereign, corporate, collateralised, etc.) creates protection from the possibility of losses in any particular market sector. Choosing bonds of different maturities helps you manage interest rate risk.
With that in mind, consider these various objectives and strategies for achieving them. As always, consult your financial advisor and take advice if you are uncertain.