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The Short Answer

Should I Buy Bonds?

In a time of rising interest rates and inflation, here’s what you need to know about what buying bonds can do for your portfolio.

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Are You Thinking About Buying Bonds?

Bonds won’t make you rich overnight. However, what they can do is provide diversification and risk control for your portfolio.

“Even during periods of rising interest rates, bonds usually have a lower correlation with stocks than most other major asset classes, which enhances their ability to reduce risk at the portfolio level,” says portfolio strategist Amy C. Arnott.

Should You Buy Bonds Based on the Markets Today?

Rising interest rates and inflation have been ruthless on the markets, leading bonds to suffer major losses—and also leading to a significant decline in prices.

That’s because interest rates and bond prices move in opposite directions: When one goes up, the other goes down.

And just as interest rates and bond prices are inversely correlated, so are bond prices and yields. In other words, when you buy bonds at a discount, you stand to earn greater yield from it.

So, while it might seem strange to invest in bonds given the year’s headlines, Arnott has a message for investors: Don’t give up on bonds just yet. She believes they still deserve a role in your portfolio.

How Can I Buy Bonds?

Investors can buy bonds through:

  1. A brokerage. You can even do this online through a robo-advisor.
  2. An exchange-traded fund or mutual fund. Also known as bond funds, these are low-cost options that offer broad diversification.
  3. The U.S. government. Government bonds, like I Bonds, can be purchased directly from the official website.

What Are the Best Bonds to Buy?

With any investment, you first need to determine the “why”: Why do I need bonds in my portfolio?

Once you have your answer, you can start your search with the Morningstar Medalist Rating. Check out these lists for some strong options with our highest ratings of Gold:

The Best Bond ETFs

The Best Bond Funds

Although it’s been a rough year for bonds, we think they’re still worth considering. To see if bonds are the right investment for you, read Morningstar’s Guide to Fixed-Income Investing.