Investment Structure for Fixed Income, Part II
In this chapter, I will continue the discussion of how to determine the appropriate fixed income structure for individual investors, but I would like to change the focus from the characteristics of the underlying bonds to those of the managers themselves. As I discussed in Chapter 3, when I covered the basics of the investment structure for equities, a strong case can be made that a global outlook for stock investing is the best way to reduce risk and maximize your opportunity set for returns. Does the same rule of thumb apply to bonds? In Chapter 4, I contrasted the results of active and passive managers across a variety of equity portfolio types and found that there is a mixed bag when it comes to whether there is any consistent value to active management among stock mutual funds. Are the results any clearer for bonds? Finally, whereas the discussion in Chapter 5 dealt mainly with traditional lower-risk, investment-grade fixed income investments, what about other types of bonds, like high yield and emerging markets? Is there merit to considering these in the portfolio? To keep things interesting, I will answer the second question first.