Friday, March 04, 2011

Retirees with bond portfolios should prepare for a higher interest rate environment

I received an email with an attached PDF written by Wells Fargo about strategies for “fixed income” investors with heavy bond portfolios in rising interest rate environments.

Although the article is probably private and copyrighted, here’s a similar article from Thornburg (by several authors, such as George Strickland) that talks about the “Laddered Bond Porfolio” in conjunction with “duration” and “call provisions”. The link is here

Actually, Wells Fargo has a similar, but shorter PDF paper online (website url) here
Retirees with heavy bond exposure could face considerable loss of principal in a rising interest rate environment. On the other hand, rising interest rates can make typical CD’s and other principal-safe investments pay more.
Motley Fool has an article about this, about 10 years old, that I think I recall seeing a coworker show me when I was working for ING in Minneapolis, link here

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