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There are four main reasons why you would hold bonds in a balanced portfolio. The first is that bonds will usually outperform cash over any given period of time. In fact, over the last 10 years to May 2017 bonds outperformed cash and even shares over that period.
The second benefit of holding corporate bonds in a balanced portfolio is that they do offer predictable income. They offer that more so than dividends, which can be stopped and cut off by the company at their discretion.
The third benefit is that the bond is a legal commitment from the company to the investor that it is to pay coupons, and the face-value at the maturity of the bond. This means that bonds in the same company are less risky than shares.
The last benefit owning corporate bonds in a balanced portfolio is that they do offer investors the opportunity to diversify away from some of their other asset classes, and smooth some of their earnings.
In addition, it does allow investors to get access to some investments that aren’t listed on the ASX, from unlisted sectors, such as infrastructure and also from off-shore issuers such as Apple.
Why now is the time to invest in bonds - FIIG Expert Series
Superannuation in 2019 - what you need to know - FIIG Expert Series
What is corporate bond?
The role of corporate bonds in a balanced portfolio
How do corporate bonds work
The 3 main types of corporate bonds
How to buy and sell corporate bonds
What is a yield?
What is a coupon?
What is maturity date?
What is face value?
What is an issuer?
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