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Market Update

BP's Wakeup Call to Bond Investors

When it comes to bond investing, the diversification message is often no more than a whisper. But as BP bonds show, it should be louder and clearer.

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Investment-grade corporate bonds as measured by the Morningstar US Corporate Index have risen about 3% on the year but trail Treasuries by close to 1%. In hindsight, you would have rather been in Treasuries, but a diversified corporate bond fund or exchange-traded fund has probably still produced positive returns.

The key word is diversified. Investors have no shortage of reminders as to the importance of diversification in asset allocation and stock portfolios. The message is loud and clear. When it comes to bond investing, however, the diversification message is often no more than a whisper.

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Bill Mast does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.