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Bond Strategies in the Face of Rising Interest Rates

Many investors understand maximizing return as the obvious primary goal of investing. Yet most financial economists would argue that the primary purpose of a portfolio is, not to maximize return, but to enhance the likelihood of achieving specified financial objectives at an acceptable level of risk. Returns are great; risk, less so. Yet the opportunity to enjoy future return must be purchased by taking on present risk. There’s no other way to obtain it. Fortunately, while future return cannot be predicted, the degree of our present uncertainty about it – i.e., the risk borne now so as to achieve that future return – can be gauged. It can therefore be controlled. One way of controlling risk is the strategic use of fixed income investments such as bonds.   

But with interest rates rising, isn’t this a particularly risky time to own bonds?

Schultz Collins has identified and evaluated several bond strategies investors may wish to consider, taking into account the current market and interest rate environment. These approaches enable investors to preserve the risk/reward characteristics of an asset allocation election while positioning their bond investments advantageously. In pursuing these strategies, investors should understand that while every investment decision is risky, risk can be managed in a way that can enhance the probability of a successful outcome.

 

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