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The risk-free rate (U.S. Treasury yield) now hovers around\n1%, which means that bond investors today are likely to lose <\/em>purchasing power over time given the effects of inflation. The\noutlook also remains fairly bleak: interest rates are actively being pushed\nlower by the Federal Reserve and central banks across the world, with bond\nbuying and stimulus programs running at near full steam. The end result is that\ninterest rates are not likely to move substantially higher for several years,\nin my view.<\/p>\n\n\n\n ______________________________________________________________________________<\/p>\n\n\n\n Taking Cues from Headlines May Be Costly\u2026Time to Focus on the Fundamentals<\/a><\/strong><\/p>\n\n\n\n While the U.S. and\nGlobal economies are still facing unprecedented struggles with the COVID-19\npandemic, we have still seen the markets rally. Now is no time to sit on the\nsidelines, so instead of letting fearful headlines and media hysteria cause you\nto make knee-jerk responses, I recommend making decisions based on data and\nfundamentals. To help you do this, I am offering all readers our just-released\nStock Market Outlook report. This report contains some of our key forecasts to\nconsider such as:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!\u00a0 ______________________________________________________________________________<\/p>\n\n\n\n This environment may have many investors wondering whether\nit\u2019s worth owning bonds anymore. I think the answer first depends on your\ntolerance for volatility, your income needs, and your long-term goals. I\npersonally would argue that a majority of investors do not need significant\nfixed income in an investment portfolio with a long-term time horizon. But that\ndoes not mean bonds are dead, or that they can no longer play a vital role for\nsome investment strategies.<\/p>\n\n\n\n For one, bonds can still be used to diversify a portfolio\nand reduce risk. Looking at the S&P 500 Index and the Bloomberg Barclays\nAggregate U.S. Bond Index over the last ten years, there is basically zero\ncorrelation between the two. 3<\/sup> When bonds zig, stocks zag, and vice\nversa. For investors, that means when stocks in a portfolio experience price\ndeclines, bonds usually see price increases. The end result is less portfolio\nvolatility \u2013 an outcome that\u2019s important for many investors, even if it means\nslightly lower total returns over time. Second, even though most high-quality\nbonds are paying very little interest at the moment, they still offer very high\nprobability of principal protection \u2013 which, again, is important to some\ninvestors. The so-called \u2018sleep at night\u2019 factor. <\/p>\n\n\n\n At the end of the day, the issue I see in the bond markets\ntoday is less about low interest rates and more about investors \u201creaching for\nyield.\u201d There is a trend among retail investors of moving further out on the\nbond risk curve in order to obtain income, in many cases buying lower quality\nhigh-yield bonds and even emerging market debt (where yields are much higher). If\nthat sounds like you, then maybe it is\ntime<\/em> to sanity check the role of bonds in your portfolio, and decide\nwhether they\u2019re worth owning at all. Chances are, you can produce similar\nlevels of income with better risk profiles elsewhere, for example in\ndividend-paying value stocks. <\/p>\n\n\n\n Bottom Line for Investors<\/strong><\/p>\n\n\n\n Bonds continue to serve many key functions in\nportfolio management. And for many older investors, bonds are \u2013 and will remain\n\u2013 a bedrock for your investment strategy. <\/p>\n\n\n\n But in the current market environment, no\nsingle bond investment is capable of producing the income and <\/em>principal protection that many investors seek. Investors need\nto get creative, and I think one smart option is to build a customized\nportfolio of high-quality corporate bonds coupled with dividend-paying value\nstocks, to strike a balance between income, stability, and long-term growth. <\/p>\n\n\n\n In addition to a customized portfolio, I recommend looking at the whole picture and making decisions based on data and fundamentals. To help you do this, I am offering all readers our <\/a>Just-Released July 2020 Stock Market Outlook Report.\u00a0<\/a><\/strong><\/p>\n\n\n\n This Special\nReport is packed with newly revised predictions that can help you base your\nnext investment move on hard data. For example, you’ll discover Zacks\u2019 view on:<\/p>\n\n\n\n If you have $500,000 or more to invest and want to learn more about these forecasts, click on the link below to get your free report today!4<\/sup><\/p>\n","protected":false},"excerpt":{"rendered":" Even with interest rates close to zero, bonds can still be a useful part of your investment strategy. <\/p>\n","protected":false},"author":3,"featured_media":7430,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[63,71],"tags":[],"class_list":["post-8683","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-mitch-on-the-markets","category-private-client-group"],"acf":[],"_links":{"self":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8683","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/comments?post=8683"}],"version-history":[{"count":1,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8683\/revisions"}],"predecessor-version":[{"id":10594,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/posts\/8683\/revisions\/10594"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/media?parent=8683"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/categories?post=8683"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zacksim.com\/blog\/wp-json\/wp\/v2\/tags?post=8683"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
IT’S FREE. Download the Just-Released July 2020 Stock Market Outlook<\/a><\/strong>2<\/sup><\/p>\n\n\n\n