Investing in Fixed Income

This chapter presents profitable ways to invest in fixed income. The bond allocation in a family investment portfolio serves many purposes. It provides a relatively steady stream of income. It provides stability to the portfolio, controlling volatility within parameters acceptable to the family. Fixed-income markets–bond markets–tend to be efficient, meaning that it is difficult for any manager to produce sustained outperformance. They tend to be low returning, net of inflation, meaning that there is little wealth creation potential to be had in the sector. Fixed-income markets tend to follow broad secular trends as interest rates rise over the course of many years. This chapter describes typical mistakes that are made in fixed-income portfolios along with few best practices in the same sector.