Model portfolios: Fixed interest funds

Key Points Recent performance has been great but this may not be repeated Keeping our fixed interest short term and safe Two new funds added to our portfolios Fixed interest funds have performed well in recent years but we’re wary of them today. As interest rates have fallen around the world, fixed interest investors have received capital gains. The opposite will occur if rates rise sharply at some point because bonds fall in price as interest rates rise. Current record low interest rates set the stage for nasty potential losses and put a cap on potential gains. That’s not...

Fixed interest funds have performed well in recent years but we’re wary of them today. As interest rates have fallen around the world, fixed interest investors have received capital gains. The opposite will occur if rates rise sharply at some point because bonds fall in price as interest rates rise.

Current record low interest rates set the stage for nasty potential losses and put a cap on potential gains. That’s not an appetising risk/reward equation.

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