Home Finance and Budgeting Income Portfolio Strategies – What Percentage of Your Portfolio Should Be Fixed Income?

Income Portfolio Strategies – What Percentage of Your Portfolio Should Be Fixed Income?

by Cynthia
Income Portfolio Strategies

Have you been eager to learn about income portfolio strategies that can safeguard your investments while yielding decent returns? If you are, it means you are interested in knowing the percentage of your portfolio that should be dedicated to fixed income. In this guide, you will understand what fixed income investing means and the portfolio strategies that will boost your gains over the years.

Bonds are usually called fixed income investments because they generate specific interests that are paid to investors quarterly or annually. These regular payouts are called coupons sometimes, and interests are paid at a fixed rate throughout the maturity period of the bonds. The benefits of investing in this portfolio include risk diversification, fixed income payouts, and lower risk exposure.

In simple terms, an investment portfolio is the list of financial assets owned by an individual or company for investment gains. And income portfolio strategies refer to the techniques of earning significant returns on low-risk securities with pre-determined interest rates. There are various classes of fixed income investing, such as certificates of deposit, government bonds, company bonds, treasury, bills, and bond mutual bonds among others.

To this end, it will be easy to calculate the percentage of your portfolio that should be fixed income based on portfolio strategies.

While determining the percentage of your portfolio that should be fixed income is dependent on prevailing market rates, it is best to assess income portfolio strategies that should be factored into calculating the fixed income investments. This brings us to the proven strategies – or types – for fixed income investments that you may wish to consider for sustainable returns.

Income Portfolio Strategies

  • Laddered Bond Portfolio

Just as the word “ladder” indicates, this investment portfolio stands for fixed income securities that mature at different dates – from the lowest to the highest. This strategy serves to diversify investments that mature one after the other in a laddering fashion so that the gains from matured short-term bonds can be invested into high-yielding long-term bonds.

  • Bullet Bond Portfolio

This investment strategy works by buying different but fixed income bonds that mature at the same date. The securities may be bought at different dates and periods, but they are calculated to mature and yield profits at the same maturity date. This creates a diversified investment portfolio that can yield returns at a future date when the investor requires the fund to manage a given need such as a wedding, real estate, or college education.

  • Barbell Investing

Also known as Barbell bond portfolio investment, this bond purchase strategy involves buying two assets that are short-term and long-term. When the short-term bonds mature, their gains are then plowed back into financing new bonds that mature at that time.

In many cases, short-term stocks mature in about 5 years and long-term stocks mature in 10 years or more. Once the short-term bonds mature, they must be plowed into new ones at maturity so that their gains can keep increasing.

Portfolio Diversification For Risk Management

To minimize the risks associated with your investment portfolio, you must apply the following factors for results:

  • High Equities

Putting your money in high-paying equities with stable value may be the best way to go if you are thinking of retirement or old-age savings. These equities must be screened by their large market size, high dividends, low volatility, sensible valuations, and sector diversification.

  • Real Estate Investment Trusts

If you want current fixed income securities with high dividends, lower risks, and manageable liquidity, then you may consider real estate investment trusts (REITs). Just like real estate investment, these securities trade like stocks, and they are not readily classified as equities and bonds, and they are able to withstand market volatility for increased profits.

  • Emerging Market Debt

If you can access exchange-traded funds (ETF) or mutual funds, then you may consider investing in emerging market debts. Their gains are normally high and they are not influenced by market risks emerging in a given country, and their prices are usually affordable for seasoned investors.

Based on the above factors and varieties, you can consult your investment broker or advisor for guidance if you must calculate any desired percentages for fixed income portfolios. You must also bear in mind that all financial investments come with default risks that may cause you to lose your money over time, so it’s advisable you invest what you are willing to lose without any serious consequences on your family or business finances.

Photo by Yan Krukov


Disclaimer: This site may include affiliate links to products. If you decide to click one of them, we may receive a commission at no extra cost to you. Thank you.

Related Articles

Leave a Comment