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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Sunday, June 25, 2006

Benefits of Bonds in Your Portfolio

Bonds can be an excellent way to diversify your overall portfolio. Though they typically garner lower gains, the risk involved is also low. When adding Bonds to your stock portfolio you have instantly reduced your risk and as you know diversification will help your portfolio in the long run. Here are some other good reasons to look toward bonds.

Potential Growth
Historically bonds give you growth in your portfolio while lowering your risk

Historically Low Risk
Take any long-term slice of history of the U.S. stock market and you will see bonds are lower risk than stocks.

Diversification Benefits
Stock prices and bond prices often move inverse to one another and this is why diversification through bonds is a great investment idea.

Income Generation
Because bonds oftengive you steady income at regular intervals this increases your portfolio's liquidity.

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