Add Diversity To Your Portfolio With Bonds

 

Finding an appropriate investment vehicle that fits their risk profile while simultaneously providing excellent returns is a challenge for more cautious investors. Stocks can provide bigger returns but are more volatile, whereas GICs provide lesser returns due to their safety. Is there a happy medium? Bonds can provide your portfolio with less volatility than equities by offering a consistent source of income as well as a higher level of safety and capital protection than an equities-only strategy.

 

An Investment That Provides Ongoing Income

 

A bond is simply an IOU: the borrower (issuer) commits to pay the investor a certain rate of interest (coupon rate) on a regular basis for as long as the investor maintains the investment, and then the principal is repaid on specified maturity date. It's important to remember that the value of the bond is inversely proportional to interest rates. In other words, as interest rates fall, the price of bonds normally rises. However, the price will fall when interest rates rise. You can either buy and retain bonds until they mature, earning income for the remainder of their lives, or sell them before they mature.

 

Benefits Of Bonds

 

Bonds have the following benefits:

 

-- If held to maturity, you'll get a consistent stream of income and an issuer-guaranteed payback price.

-- Cash flows that are predictable over time

-- There are government, foreign currency-denominated, and corporate-issued bonds to choose from.

-- Adding more diversification to your portfolio can help you minimize your total investment risk.

 

Get The Help You Need

 

Your SGI Securities Financial Advisor can assist you in assessing the various bond options. You can evaluate whether bonds are the best investment for you by working together. Contact us for more information.