A really interesting article pointing out which bonds tend to serve their purpose most dutifully, while others fall short (as all bonds are not created equal). For sometimes, investors seem to lose sight of the fact that bonds really should provide a ballast to one’s portfolio during turbulent stock market times.

In that light, one should ensure that a least a portion of their bond portfolio preferably exhibits a negative correlation with stock movements. Notably, quite a few bond sectors don’t. For example, high-yield bonds and corporate bonds tend to display a higher correlation with stocks than U.S. Treasuries. Although yields are low on Treasuries, one of their other major functions within a portfolio (besides investment return) is to reduce losses in stock market downturns. As witnessed by their negative correlation with stocks, bonds “zig” when stocks “zag,” thereby providing buoyancy to one’s sinking stock ship.

The linked article also succinctly points out that a purpose of some of your bond portfolio’s function/objective/diversification is best met by bonds of high credit quality with short duration. This point is further supported by the fact that most “new’" bond money is going into ultrashort duration funds, while corporate and high-yield inflows have been drying up in 2018.

Click on the link above to read more about bonds and their correlation with stocks!