Reducing your portfolio volatility and improving yield through fixed income
A balanced portfolio is more resilient to market turbulence. Many Australian investors are heavily concentrated in growth assets such as equities and property. Bonds – often considered to be defensive assets – can be used to even out the risk of concentrating your portfolio in growth assets.
With cash rates at an all time low, fixed income can provide a stable source of yield for your portfolio – paying interest rates which are typically above the cash rate.
However like any investment there are risks associated with fixed income – including liquidity risk (meaning there may not be a buyer when you wish to sell), interest rate risk (if interest rates rise then the value of bond may fall) and issuer default.
Read our whitepaper – NAB’s fixed income expert Mark Todd takes a look at the role of fixed income, the risks and benefits and how to access these types of investments.