During the "Not Your Grandfather’s Bond Funds" panel at the Morningstar ETF Conference, participants gave bond investors a few things to think about. Moderated by Morningstar's Sarah Bush, the panel featured Research Affiliates' Shane Shepherd, BlackRock/iShares' Karen Schenone, and PIMCO's Natalie Zahradnik. Here are some of the key broad takeaways for investors:
Know What You Want Your Bond Allocation to Do
When choosing fixed-income investments and setting expectations for them, Schenone recommends that investors answer one question: What is my fixed-income sleeve supposed to do? "You can't just look at fixed income in isolation," she says. Is the goal of your bond allocation to hedge against equity-market risk? To generate income for you to live off? Different goals require different types of bond funds. Investors looking to diversify away equity-market risk would be better-served by a longer-duration Treasury fund than a lower-quality corporate bond fund. Income-seekers, meanwhile, might do well with a smattering of junk-bond exposure.