We all know that bonds were poor performers in the 2nd quarter. We also know that they are unlikely to hit a home run in the 3rd quarter. So why is we still tell most clients that, despite all this, they should have some bonds in their portfolio?
Thanks to the excellent article by Carolyn T. Geer on “Why Your Portfolio Still Needs Bonds” in the Wall Street Journal, we may not need to answer that question again. We can just point everyone to her compact but comprehensive explanation and move on to the next subject.
Thank you, Carolyn! We probably could not have phrased it as well as you did (and even if we could, isn’t it nice to sometimes just sit back and have someone do the heavy lifting for us?).
Here’s one tried-and-true piece of advice from Carolyn’s column that we have used many a time with clients, to good effect:
“…instead of dumping bonds wholesale or trying to time purchases and sales around interest-rate movements, long-term investors would do well to backspace a moment and ask themselves why they own bonds in the first place.”
That is the crux of it, of course.
Few of use choose to own bonds for their exciting returns (although those occasional years when they do turn in a stellar performance, it truly is icing on the cake).
Most of us, of course, own bonds due to their ability to provide steady and dependable income and their lower risk profile that limits, although does not eliminate, their potential losses.
And that really sums it all up.
If you haven’t read Carolyn’s article, definitely do so. Here’s the link.