Here's what my financial advisor said when I asked about dumping fixed income in a rising interest rate environment: When we talk about "fixed income" its primarily referencing the coupon rateof income paid on a bond issue, not the fact that the value can fluctuatewith market moves.In a quickly rising rate environment (in the short term) the bonds will tendto erode their value - but you need to keep in mind long term views i.e.5-10 years even on bonds. Bonds will also provide diversification to theequities market and I think an individual should have both stocks and bonds.Right now (short term) dividend paying stocks have been paying a higherincome than bonds, but you need to keep in mind that it can change overperiods of time. Primarily bonds will reduce swings in stock performance sothat the path you take has less variances. Right now bonds will hold backthe performance of stocks (when stocks are positively moving).What I would recommend is that on the bonds not to eliminate them, but toinvest in those that won't erode as greatly with rising interestrates....i.e. TIPS, shorten maturities on the bonds/funds and look atadjustable rate issues.I hope this helps......?
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