Bonds can help shelter investors from volatility

Bonds can also provide portfolio protection

While bonds are often thought of for their ability to create consistent income, they also provide other important benefits to advisors who allocate to fixed income for their clients. Bonds can also provide portfolio protection. US Treasuries for instance are often used as a ”flight to quality” instrument for clients seeking safety. On the other hand, heavily leveraged companies with a heavy capital structure trade with a higher correlation to equities and therefore are impacted by market volatility. So finding the right balance is both an art and a science.

Custom Bond Portfolios can be more nimble than Bond ETFs in times of market volatility

Bond ETFs do a great job providing advisors with a quick way to access the broader fixed income or investment grade corporate market. However, they are not as agile as custom bond portfolios nor do they select bonds on their potential to outperform all the other bonds in the index, instead they select bonds based on rules around index replication.