Are Bonds Too Risky For Your Portfolio?

With interest rates on the rise, we’ve recently been getting a lot of questions as to whether it really makes sense to invest in bonds right now. A lot of experts are even talking about a bond bubble. After all, bonds lose value when interest rates go up and even if interest rates stay level, you’re essentially locking yourself into a pretty low rate of return for the duration of the bond.

There are a few reasons bonds might still make sense as part of a diversified portfolio. First, while they can lose value, bonds are still generally not as volatile as stocks when they do. Second, there’s always the chance of a double-dip recession, which could cause interest rates to fall even further and bonds prices to rise. Finally, rising interest rates might indicate a strengthening economy, which means losses on the bond portion of your portfolio could be offset by rising stock values.

Source: Forbes

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