6 rules for bond investors

Bonds are an important part of investors' portfolios if approached in the right way, says Morningstar's Christine Benz

Christine Benz 18 November, 2019 | 1:31AM

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Many investors feel they should have bonds somewhere in their portfolios, but don't know how much they should allocate or whether to buy individual bonds or funds. They also struggle with some of the key concepts, and how long they should hold bonds for.

A smart allocation to bonds can make the difference between a portfolio with scary ups and downs that spook investors out of the stock market, leaving a retiree short of the money needed to pay bills, and a more stable and diversified portfolio that can deliver the outcome an investor needs.

1. Watch the flipsides
Confusion often starts with the basic premise of bonds: bad economic news is generally good news for bond prices and vice versa. The recent popularity of bond funds can be put down to fears that the world economy is heading for a downturn, especially with the US-China trade war dragging on growth. If greed makes stocks go up and fear makes them go down, it is generally the opposite for bond prices.

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About Author

Christine Benz

Christine Benz  Christine Benz is Morningstar's director of personal finance and author of 30-Minute Money Solutions: A Step-by-Step Guide to Managing Your Finances and the Morningstar Guide to Mutual Funds: 5-Star Strategies for Success. Follow Christine on Twitter: @christine_benz.