Q. Are bonds still necessary for retirees?
A. With interest rates hovering near zero for a few years, this is a legit question. However, for retirees, fixed income is still an important part of their portfolio.
The questions are how much weight to allocate to fixed income and what kind of fixed income assets to include.
The answers certainly vary with different people, but generally, the following fixed income securities should be included in a retiree's portfolio:
A. With interest rates hovering near zero for a few years, this is a legit question. However, for retirees, fixed income is still an important part of their portfolio.
The questions are how much weight to allocate to fixed income and what kind of fixed income assets to include.
The answers certainly vary with different people, but generally, the following fixed income securities should be included in a retiree's portfolio:
- High-yield corporate bonds (own the individual bonds to reap some income while the bonds are outstanding and then recoup the entire principal when the debts mature)
- Municipal bonds based by some specific revenue sources, such as hospitals (Municipal bonds usually come with tax benefits, also their yield curve is much steeper than that of other types of debt making the longer term munis with better returns)
- Bond ETFs (for their low cost and flexibility, plus professionally managed funds will evaluate individual bonds and roll them over when they mature)
- Emerging market corporate bonds (to diversify your bond portfolio)
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