Bond Alternatives for Fixed Income Allocations

Gary LoDuca |

This Financial Advisor article exposes a flaw that many savers still believe about bonds being a defensive hedge and counter-balance to equities in an asset allocation.  Bonds are securities, and risk assets, and are exposed to capital losses and those losses can be substantial. 

Alternatives do exist, as this 4+ year old Forbes article explains, and have been shown to be more effective asset allocation compared to bonds as this 20 page whitepaper details.  Here comes the scary part for some savers, the alternative is called an annuity.  I know that is a loaded word, but all annuities are not the same, just as all cars are not the same.  A fixed annuity or fixed index annuity (FIA) is an insurance product and is not exposed to market risk so the principal amount doesn't fluctuate like a bond.  Annuity interest can be credited as a fixed rate over time or tied to the performance of an index over time.   

If you're tired of worrying about market risk and want to learn what alternatives exist, having a thoughtful conversation with an independent fiduciary advisor is a good first step.  Ask the independent fiduciary advisor is they have access to the vast annuity market of providers.  If they do, that's a great resource to explore.  The fiduciary advisor will help you identify or clarify what benefits you're looking for and will then research what annuities are best options for you to consider. 

As a thoughtful independent fiduciary advisor, with access to the vast annuity market, I'm available for a thoughtful conversation about what bond alternatives (annuities) are the best options for you to consider.