After nearly 13 years of a bull market, some are suggesting that there is no longer a need for bonds or fixed income in their portfolios. This ideas centers on the fact that stock returns are so strong year after year after and some bonds have actually lost money this year. Furthermore, "logic" says, given the massive amount of Government debt issued over the last decade and the certainty that inflation is going to cause rates to rise, there is little reason to owns bonds in this “new” environment. Does a diversified portfolio still make sense, we are asked?
Thankfully, our investment experience spans a much longer time frame than this 13-year bull market. We have experience both bull and bear markets in our 30+ years that reminds us of the wisdom of strategic allocations that includes fixed income (bonds). We have witnessed great and bad market time periods come and go in the past and we expect that history will repeat itself. Again, and again, and again. And likely again.
We believe that there will be a time in the future (no, we don’t know when) that equity returns will be negative – maybe significantly so. At that point, you will likely be grateful to have a fixed income allocation to help preserve your capital during those difficult times. Our plan would be to identify an appropriate time to reallocate from fixed income to equity. In other words: we can take money from those bonds and buy low, then wait for the future appreciate.
This is all part of a logical, disciplined process that is aimed at protecting and growing your capital to help fund your cherished future financial goals. Therefore, a diversified portfolio makes mores sense than ever in the "not-so-new" environment. We have no plans to deviate from this approach and would suggest that you be very wary of anyone suggesting you do otherwise.
Thank you for your trust and support. Remember to always stay focused on your long-term goals and objectives. Please contact us if you have questions or would like to discuss this further. jgilles@financialplanpartners.com or wregenscheid@financialplanpartners.com.
A diversified portfolio does not assure a profit or protect against loss in a declining market.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.