How can I separate myths from reality when it comes to fixed-income investing? Does a rising Fed funds rate translate to negative bond returns? Should I focus more on interest rate risk than credit risk? Does it pay to be overweight in high-yield credit? Will my bond portfolio behave like I expect it to? Am I exposed to unintended risks? This presentation will address these questions, in addition to providing perspective on the macro environment and the four key roles of fixed income in your portfolio.
In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk, liquidity risk, call risk, and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible. Any fixed income security sold or redeemed prior to maturity may be subject to loss.