Ways to Stabilize Your Portfolio with Bond


The common misconception about bonds are that they are good only for the old investors or for those who believe in a conservative approach towards investment. The truth is far from it. The fact is that for a portfolio that is properly balanced, bonds are a very important component. Not only at the later stage of life but at every single stage of investment, bonds play a crucial role in imparting a sense of security and balance by downsizing the risk element.

Bonds are important to a portfolio because : They provide crucial stability to the portfolio to balance against the volatility of stock market, provides a steady income, which is tax free in some instances  and contributed steadily to your capital by way of assured interests.

A well balanced portfolio will always reflect good asset allocation and proper diversification.  It is important to allocate your funds across a wide range of equity instruments, bonds, debts and cash instruments to ensure maximum returns. Diversification is equally crucial because it helps in reducing the risks which a particular sector might have on your portfolio, by helping you cash in on other profit making sectors.

Bonds are your guarantee to ensure a steady source of income because of its assured rate of interest and timely returns. In spite of rapid technological progress which helps financial consultants to track down every single movement of stocks and other financial instruments, there is no sure shot formula that  can predict with  a certain degree of conviction as to  which investment strategy will hit the bulls eye and which stock will bite the dust. Good investment practice in bonds will ensure that no matter how the markets  play out, bonds will ensure that you have a steady supply of money to take care of your basic needs.

Investment needs are different at various stages of life. For those who are starting out, the prime objective is maximizing profits. For those who are in the investment markets for about 10 to 15 years, th main objective could be capital growth. Those nearing retirement look to conserving their hard earned capital.

However, for investors of all groups and ages, bonds must form a prime portfolio factor. For, there is no other instrument that can guarantee us this other than bonds.

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