Interestingly, BNY Mellon Investment Management highlighted the following answer as an example of the lack of understanding of bond markets: 28% of respondents said it’s true that “fixed income investing is intended only for retirement planning.”
“Fixed income provides some of the most versatile and vibrant investment options available and yet there exists around it a sense of confusion and misperception,” Andy Provencher, head of North American distribution at the money manager, said in a statement. “Chief among these is that fixed income plays an important role solely in the immediate run-up to retirement.”
Yes, fixed-income investments can provide a stabilizing force in a portfolio at any age and a way to mitigate big price swings from riskier assets. But I wouldn’t call those 28% of respondents wildly off base, either. Consider this: BlackRock Inc.’s LifePath Index 2025 fund, which is meant for those retiring in about six years, has a 44% allocation to fixed-income assets. The 2055 fund has just 1.3%. Why is that? Because younger people are typically better off taking more risk and shifting their funds into fixed income as they approach retirement age. That impetus is most likely only stronger when U.S. stock markets have climbed to records while trillions of dollars in bonds around the world yield less than zero.
It’s overstating the case to conclude that the overwhelming majority of Americans are fixed-income illiterate. But with the global bond market growing by the day, it’s clear many of them could use a lesson or two in what role the securities can play in their financial lives.
This article was provided by Bloomberg News.