July 18, 2024

Political Commentary

News Politics Business Sports

What’s the Average Return on an All-Bond Portfolio Right Now?

2 min read

Like all markets, bonds fluctuate. Your returns will be based on what you hold, when you buy it, tax treatment and other factors. While many choose to diversify their portfolios across stocks, bonds and other assets, an all-bond portfolio may allow for more predictability and income generation. You can also diversify an all-bond portfolio with different products.

Despite the various ways to set up a portfolio, you can estimate a return on an all-bond portfolio by looking at current yields. For example, a triple-A rated corporate bond you can expect a yield of about 5.6%. Or, if you purchase a ten-year Treasury bond, you can expect a yield of about 4.45%.

That’s just the tip of the iceberg, though.

A financial advisor can help you determine the best way to set up an income-generating portfolio for your goals.

Why Invest in Bonds?

Bonds provide two main benefits for your portfolio: security and income.

A bond-based portfolio is generally secure. With a bond you aren’t an investor, you’re a lender – so you only lose money if the borrower defaults. There is still some risk here, but with creditworthy borrowers it’s low. Historically, for example, well-rated corporate bonds default between 0% and 0.38% of the time.

These portfolios are generally also income-generating, meaning they issue regular payments while you hold them. Unlike regular stocks, you don’t have to sell off bonds in order to convert them to cash. You receive cash payments periodically, typically either every every six months, creating a stream of income that can potentially last for decades depending on the details of your specific bonds.

The downside to all of this is that bonds tend to provide a low return compared to the rest of the market. Riskier assets like stocks and real estate may often outpace the returns of a bond portfolio.

Talk to a financial advisor to determine the best asset allocation for you.

Three Types of Bonds

Setting aside foreign investment, there are three types of bonds:

Leave a Reply

Copyright © All rights reserved. | Newsphere by AF themes.