A Good Time for Bonds?
Many people ask “When is the best time to get into bonds?” My answer is: Whenever you’re building an investment portfolio! In general, people buy high-grade bonds for two reasons: Preservation of capital and a fixed stream of income. Even though the market value of bonds will move up and down with interest rate fluctuations, the bond investor has the option of holding a bond until its redemption date, when he or she will receive back the full face amount of the bond. And while the investor waits for the bond’s redemption date, by call or maturity, coupon interest is regularly paid. Of course, repayment of principal and interest is based on the paying ability of the issuer. Usually, an investor’s expectations of where interest rates are headed will affect the weighting of bonds along the portfolio’s ladder of maturities, not whether or not to own bonds.