The Right Way to Add Bonds to Your Portfolio

When markets are choppy, bonds add ballast to your portfolio, offering stability no matter what interest rates do.

Cartons of financial investment products in a shopping cart i.e REITs, stocks, ETFs, bonds, mutual funds, commodities. A concept of portfolio management with risk diversification for optimal
(Image credit: Getty Images/iStockphoto)

Speculating on the direction of interest rates is a popular sport in the bond market. But it’s proving a challenging one lately. The U.S. economy is perking along, and when that happens, bond interest rates usually rise. But not this time. For the first quarter of 2019, gross domestic product increased at an annual rate of 3.2%, compared with 2.2% in the fourth quarter of 2018. But 10-year bond rates actually declined—from 3.1% in mid May 2018 to 2.4% a year later. (Prices and returns are as of May 17.)

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James K. Glassman
Contributing Columnist, Kiplinger's Personal Finance
James K. Glassman is a visiting fellow at the American Enterprise Institute. His most recent book is Safety Net: The Strategy for De-Risking Your Investments in a Time of Turbulence.