Skip to Content
ETF Specialist

Bonds as the Ballast

Despite their relatively low expected returns, bonds still provide diversification and stability.

Mentioned: , , , , , ,

After a blockbuster year for stocks and concerns about rising interest rates, some investors might be entertaining the idea of ditching their bond holdings. We've all heard the argument, "interest rates can't go much lower." Fair enough. And while interest rates have inched up since the summer of 2013, they are still close to historic lows. I can't tell you whether rates will continue their move higher by the summer, year-end, or 2016. But I can tell you that bonds play a critical role in a balanced portfolio.

It's not the sexiest asset class, but fixed income does offer important diversification benefits on top of a stable and steady income stream. 2014 is off to a rough start. With volatility on the rise, the S&P 500 Index fell about 3.5% in January. But while stocks turned south, the bond market has rallied. In the first month of the year, the Barclays U.S. Aggregate Bond Index rose 1.5%.

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

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.