Fixed Income Investing

Fixed income is used to stabilize the portfolio against the equity risk (and potentially supply a controllable income stream). To play this important role, fixed income investments should be as risk-free as possible. For this reason, volatile fixed income classes, such as long-term bonds, junk bonds and mortgage-backed securities should be avoided. Instead, the risk and expected return characteristics of a portfolio can be improved if any additional expected return is addressed by varying the stock/bond mix.

In the overall design and ongoing management of the portfolio, it is important for each asset class to maintain its specific role. 

For fixed income, this means ensuring the fixed income portfolio is not stretched for additional yield by assuming imprudent risks. Strategies such as purchasing low-credit-quality bonds or purchasing bonds in risky market sectors fall into such a risk-stretching category.  

Equities are a far better alternative in attempting to generate additional yield. The role of fixed income is to stay true to its original purpose: providing diversification from equity risk, assisting in protecting against inflation and serving as a source of income and/or liquidity.

What distinguishes our fixed income approach? We would point to an academically based philosophy that is the foundation of a truly customized fixed income portfolio. The construction of such portfolios are guided by clients’ objectives and risk tolerance and managed in a prudent fashion. By concentrating on asset preservation and principal protection, we helps investors address needs and objectives via a prudently designed fixed income portfolio built for the long term.

If you would like to talk to a Pile Wealth Advisor about customized wealth management strategies that can help you reach your financial goals, please call us at (888) 513-3454 and ask to speak to Neal Clements.