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Author: Bettf One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35357  
Subject: professional advice on fixed income Date: 6/9/2004 5:35 PM
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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 rate
of income paid on a bond issue, not the fact that the value can fluctuate
with market moves.

In a quickly rising rate environment (in the short term) the bonds will tend
to 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 the
equities market and I think an individual should have both stocks and bonds.


Right now (short term) dividend paying stocks have been paying a higher
income than bonds, but you need to keep in mind that it can change over
periods of time. Primarily bonds will reduce swings in stock performance so
that the path you take has less variances. Right now bonds will hold back
the performance of stocks (when stocks are positively moving).

What I would recommend is that on the bonds not to eliminate them, but to
invest in those that won't erode as greatly with rising interest
rates....i.e. TIPS, shorten maturities on the bonds/funds and look at
adjustable rate issues.
I hope this helps......?
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