Investors wanting to invest in less risky assets and who are willing to accept lower returns, such as those nearing retirement, tend to increase their holding of fixed income assets.
Trevor Welsh, head of UK sovereign and inflation at Aviva Investors, says younger investors should also consider fixed income for diversification purposes.
Mr Welsh says fixed income offers important diversification benefits because there are many different types of fixed income assets ranging from short-dated government bonds at one end of the risk spectrum to high-yield corporate debt, convertibles and emerging-market debt at the other.
Mr Welsh says: “Investors can utilise specialist investment managers that invest across all fixed income assets to increase risk-adjusted returns.”
Karthica Underwood, Chartered Financial Planner at Principal Financial Planning, says investors looking for a source of regular income, or perhaps a known capital lump sum in the future, should consider fixed income funds.
She says investors looking to manage the overall level of investment risk should also consider these funds.
Ms Underwood says for most investors, fixed income will feature in their investment portfolio as it makes up part of an overall balanced portfolio.
She says: “The extent to which [it will feature in a portfolio] will depend on whether the client is looking for income, growth or a combination of the two.
“It will also depend on the level of risk that the investor is comfortable with and also the level of losses that they can tolerate.”
Adrian Lowcock, senior investment manager of Bristol-based Hargreaves Lansdown, says fixed income funds can be useful in a wide range of portfolios to diversify and help reduce risk.
He says they are most suitable for investors who don’t want to take too much volatility in their portfolio and are dependent on a steady income stream. But Mr Lowcock says advisers should always remember that investors can still lose money investing in fixed income.
