Bonds Can Provide Stability in an Equity Bear Market

Portfolio Solutions® |

The chart below demonstrates track records for investment classes during turbulent periods in equity markets. By sorting monthly equity returns into deciles and examining the worst periods, we find that high-quality bonds* have provided for diversification and stability in portfolios. 

Thumbnail

 

At Portfolio Solutions®, your portfolio is built with your long-term goals in mind. After speaking with your Portfolio Solutions® Financial Advisor, an appropriate asset allocation is agreed upon based on the level of investment risk you are willing, able, and need to take – all to help you achieve an expected return to reach your financial goals. Short-term market fluctuations should have no bearing on this decision.

Portfolio Solutions® will continue to monitor your portfolio to keep your strategy in place and disciplined. If you have specific questions about bonds, or recent changes in your long-term financial goals or financial status, please don’t hesitate to contact us by calling (248) 689-1550.

Not a current client, but ready to get started? Click here to schedule a phone consultation to learn more about Portfolio Solutions® and how we can serve you!

 

 

*A bond whose credit quality is considered to be among the highest by independent bond-rating agencies. 

Sources: Vanguard calculations based on data from Thomson Reuters Datastream, Bloomberg Barclays, HFRI, MSCI, FTSE, CRSP, S&P, and Dow Jones. All data provided through September 30, 2018.

Notes: U.S. stocks represented by Dow Jones U.S. Total Stock Market Index through April 2005, MSCI US Broad Market Index through June 2013 and CRSP US Total Market Index thereafter; emerging markets stocks are represented by MSCI Emerging Markets Index; REITs by FTSE NAREIT Equity REIT Index; dividend stocks by Dow Jones U.S. Select Dividend Index; commodities by S&P GSCI Commodity Index; high yield bonds by Bloomberg Barclays U.S. Corporate High Yield Bond Index; emerging markets bonds by Bloomberg Barclays EM USD Aggregate Index; investment-grade corporate bonds by Bloomberg Barclays U.S. Corporate Index; U.S. Treasury bonds by Bloomberg Barclays U.S. Treasury Bond Index; U.S. Municipal Bonds by Bloomberg Barclays Municipal Bond Index;  Hedge fund index by HFRI fund-weighted total return Index and international bonds by Bloomberg Barclays Global Aggregate ex-USD Bond Index. The Dow Jones U.S. Select Dividend Index starts in January 1992; Bloomberg Barclays EM USD Aggregate Index starts in January 1993; hedge fund data start in 1994 and Bloomberg Barclays Global Aggregate ex USD Bond Index starts in January 1990. 

All investing is subject to risk, including the possible loss of the money you invest. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. Investments in bond funds are subject to interest rate, credit, and inflation risk. Diversification does not ensure a profit or protect against a loss. 

All information presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service, nor should it be construed as tax or legal advice. Please click here to see our blog disclosure, which immediately follows the “Applicable Law and Venue” section.

Go Back