Having Bonds In Your Portfolio Can Boost Returns

 

Michelle Ahoy’s heart slumped as she looked at her investments.

In 2018, her portfolio recorded its first calendar-year loss. Measured in Canadian dollars, it dropped 2.57 percent. That doesn’t mean she didn’t invest well. The 40-year old Canadian followed Nobel Prize winning research by investing in a diversified portfolio of low-cost ETFs.

Michelle didn’t like seeing her portfolio value drop. But stocks don’t always rise. On average, stocks climb roughly two out of every three calendar years. However, there’s no discernible pattern. Sometimes, they go on multiple-year upward runs. Other times, stocks languish for years or fall through the floor. That’s why investors should diversify–owning stocks and bonds.

I know what you might be thinking: Bonds are boring. Global interest rates are low. Bonds pay paltry interest.

 Michelle Ahoy, picture above with her family

photo courtesy of Michelle Ahoy

Andrew Hallam

I’m a financial columnist for Canada’s national paper, The Globe and Mail, as well as for AssetBuilder, a financial service firm based in Texas. I’m also the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School (2nd Ed. Wiley 2017) and The Global Expatriate’s Guide To Investing: From Millionaire Teacher to Millionaire Expat (Wiley 2015). My mission is to educate, motivate and inspire people on basic retirement planning and best practices for investing, using evidence-based strategies. I'm happy to comment on your questions. However, please read the Terms of Use, Privacy Policy and the Comments Policy.

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