A new look at bonds

Whether you're a market optimist or a market skeptic, an enthusiastic investor or a reluctant one, you might want to take a new look at bonds. Bonds probably deserve more attention than most investors give them. And it's not clear why they're sometimes overlooked. It may be because people consider these debt securities dull, or complicated, or both.

But, in fact, bonds have an important part to play in any well-diversified portfolio. Bonds as an asset class have the potential to provide:

A steady and predictable source of income usually paid semiannually

Repayment of investment principal at the end of a specific period called the bond's term

More price stability than stocks in volatile markets

A stronger total return than cash over the long term

Also, depending on the type of bonds you choose, you may benefit from

Tax-exempt earnings

Insured return of principal

Capital gains on price increases

Of course, there are risks with putting your money into bonds, as there are with all investments. At one extreme, you could lose your principal if an issuer defaulted, or failed to repay. At the other end of the scale, you might not earn enough to stay ahead of inflation. These are some of the reasons why it's so important to diversify your portfolio.

Alexandra Lebenthal, President and Chief
Executive Officer of
Alexandra &
James, Inc.

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