Investors are turning to riskier asset classes to avoid bond exposure and senior analyst at Vanguard [profile] Chris Philips is worried, InvestmentNews staff writer Jeff Benjamin reports.

ICI and Morningstar data show that investors are interested in dividend-paying stocks, emerging market debt commodities, REITs and junk bonds. Philips argues that an investor can't really replace bonds:

The question I always ask is, if not bonds, then what? If you are moving out of bonds, all of those strategies are different and potentially greater risk …The minute you try to replace fixed-income with stocks, they will start performing like stocks because stocks never are and never will be bonds.

Benjamin points out that bonds will keep your portfolio balanced, especially during a crisis. His data shows that from October 2007 through February 2009, U.S. stocks lost 55 percent, dividend paying stocks lost 57 percent, high yield bonds lost 25 percent, U.S. investment grade corporate bonds fell 5.9 percent and Treasury bonds gained 15.4 percent.

To read more, click here.  

Edited by: Casey Quinlan


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE