Do Bonds Offer Immunity Against Market Turbulence? | The Informed Investor 35

Episode 35: What are the best reasons to invest in bonds?

Maybe you're looking to dampen the volatility of your portfolio or address future spending needs in a concrete way. Maybe you want to reduce the impact of inflation or taxes.

Bonds, also known as fixed income, can be used to meet a variety of needs. But different bond categories may be better or worse for accomplishing your goals.

A crucial point that some investors might not understand: Putting bonds to work in your portfolio can get complex in part because not all of them behave the same way.

If you have short-term spending needs, extremely short-term bonds like Treasury bills may be helpful. (Cash is obviously an alternative.) But longer-term bonds may be more useful as you plan for longer-term saving and spending needs.

The credit quality of bonds makes a difference, too. Those issued by the US government and successful businesses are generally considered safer, and typically have lower interest rates. The opposite is true for bonds with lower credit quality. Your goals may steer you one way or the other.

Some types of bonds, known as Treasury Inflation-Protected Securities (TIPS), can help manage the risks of inflation. That's important because an average annual inflation rate of just 2.5% over 30 years reduces your purchasing power by half. Yet TIPS aren't risk-free, another characteristic that may confuse some investors.

In Episode 35 of The Informed Investor, Dimensional's Mark Gochnour, Head of Global Client Services, Wes Crill, PhD, Senior Client Solutions Director, and Jake DeKinder, Head of Client Communications, identify five reasons to consider investing in bonds and analyze what types of fixed income should (and shouldn't) be used to meet your goals.

LINKS FROM TODAY'S EPISODE:

The Informed Investor: Feedback Survey

https://www.dimensional.com/us-en/informed-investor-survey

Dimensional Perspectives: "Chutes and Bond Ladders" https://www.dimensional.com/us-en/insights/chutes-and-bond-ladders

Dimensional Perspectives: "Sizing Up the Bond Market" https://www.dimensional.com/us-en/insights/sizing-up-the-bond-market

"The Informed Investor" on YouTube www.youtube.com/playlist?list=PLCyJr6FFig-h1mA7rVP7Mbk0irFw2wA90

Dimensional Fund Advisors Shorts on YouTube https://www.youtube.com/@dimensionalfundadvisors/shorts

Mark Gochnour on LinkedIn https://www.linkedin.com/in/mark-gochnour-9a23598a/

Wes Crill on LinkedIn https://www.linkedin.com/in/wes-crill-77a49417/

Jake DeKinder on LinkedIn https://www.linkedin.com/in/jake-d-4105b98/

Learn more at https://www.dimensional.com/