Fixed Income in a Low Interest Rate Environment

Whether you measure interest rates by looking at mortgage rates, bond yields or your money market fund, they’ve begun to creep up from their recent lows.
Will they steadily climb higher and higher? I don’t know, and neither do you.  That’s not the point of this blog post.
However, I’d like to remind you of a often-used quote in the financial advice industry:
More money has been lost chasing yields than at the point of a natural tendency is to try to find the most “bang for your buck” that you can right now.  And for many who are scared of the equity markets, they have a lot sitting in cash and/or fixed income.  The only problem is that you could wind up with all bang and no buck.
So what’s the answer?
Everyone wants the most return they can achieve on their liquid or semi-liquid funds, but you must always remember that Money Management Tips risk & return are forever linked together.  You can’t get above average return without above average risk.
So, be careful of these fancy sounding bond funds or these “too good to be true” CDs or other products.  If it sounds too good to be true, it is.
I recommend an allocation to some level of fixed income in all my clients’ portfolios, and regardless of the market or interest rate environment, I always recommend high quality and short maturities.  No junk bonds.  No convertibles.  No preferred stocks. 
In my opinion, fixed income is present in a portfolio to offer a diversification benefit relative to equities.  They’re certainly not there to increase or compound the your overall portfolio risk level.
What do you think?  Is this too conservative or will Procedure Of Taking Loan From Bank “slow & steady” win the day regarding fixed income?

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