Fixed income investing is something that usually takes a backseat when it comes to our thoughts, and also, we need to think about the fast-paced stock market. With all of its daily action, and all of the promises of any superior returns, we need to be careful. If you are retiring or if you have already retired, a fixed income is something that you will need.
It cannot take the backseat. It should be riding shotgun in your mind. At this particular stage, preservation of your capital with a particular guaranteed income is something that becomes a really important goal because you probably have no idea where your money is going to come in, in the next few months.
I can totally understand having the need to have a fixed income, especially when you are getting old. Nowadays, investors always mix things up when it comes to getting exposure to different asset classes and also keeping their portfolio updated. They always want to reduce the risk and stay completely ahead of inflation.
But, who can manipulate inflation?
If we are here today, it is because of the way we have managed our finances. Some of us do not exactly manage our finances in the best way possible, while some people always have a fixed income portfolio ready to go.
It has been always shown that stock returns always outpace the bonds. As we move into retirement, like I have mentioned above, we will obviously want some fixed income instruments that will gather some capital for us and our lives. A lot of people make use of a bond ladder as a way of investing in a range of bonds with very different maturities. Some people go a different route.
I feel that you need to know that one of the most important changes to fixed income investing in the 21st century is that the long bond has given up the previously substantial yielding benefits. This is definitely problematic for a lot of individuals. For example, if we take a look at the yield curve for the major bond classes in 2019, some of them have very attractive investment opportunities while some of them do not.
When it comes to short term yields, you end up getting a decent amount of money in a very short period.
A fixed-income investment opportunity is all that some people are after. This would present an opportunity for the fixed income investors because all of the purchases can be made in the five-year to ten-year maturity range. When we are talking about these bonds maturing, some of them are reassessed when it comes to the state of the economy.