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How to Prepare Your Bonds for an Equity Correction

By Advisor Perspectives
Wealth Management


Preparing for a stock market correction? We’ve got another thing to add to your to-do list: take a look at your fixed-income holdings, too.

Nobody knows for sure if an equity correction is imminent. But it has been nearly a decade since US stocks last posted negative returns. Since nothing goes up forever, and since corrections are historically common in equity markets, a downturn is certainly possible.

Normally, equities are negatively correlated with certain types of bonds—high-grade government bonds such as US Treasuries in particular. When equities fall in value, these bonds—we like to call them risk-mitigating bonds—usually rise. This is a big reason why bonds belong in a well-diversified investment portfolio.

Read more at Advisor Perspectives.

Photo: Jim Makos

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