April 16th, 2018 | New York Times
Hold Bonds for Risk Reduction, Says Gregg Fisher in New York Times Article
First-quarter 2018 was a tough time for bonds, says an April 13 New York Times Online article titled, “Warren Buffet Isn’t a Fan of Bonds. But They May Be Good For You.” Bond returns at various maturities were mostly negative—at best, minimally positive. And so bonds did not protect investors against a falling stock market, as they are “supposed” to do. Indeed, investment guru Warren Buffett was moved to tell his shareholders that “Right now bonds should come with a warning label.”
But, says Gregg S. Fisher in the article, Gerstein Fisher’s Founder, and Head of Research & Portfolio Strategy, “You own bonds to reduce volatility, not to earn a return.” Much of the time, bonds do gain when stocks falter—and even when both assets fall simultaneously, bonds typically lose much less. Further, the article makes clear that even in the current rising-rate environment, which is rather hostile to bonds, investors can employ many strategies to reduce bond risk.
At its conclusion, the article circles back to precisely Gregg’s point: “Unless you are as patient and prescient as Mr. Buffett,” we read, “owning a slug of less-volatile [for example, shorter-maturity] bonds can help you stick to a long-term investing strategy when stocks fall.”
(The article also appeared in slightly different format in the “Mutual Funds & E.T.F.s” section of the April 15 edition of the Times.)