Capital Preservation

A stock or mutual fund certainly has the appeal of unlimited growth potential or steady dividends, but it may also have a higher level of risk than other investments. Some asset classes can be very volatile and risk losing value quickly if the markets shift.

Fixed income is an excellent tool to manage capital preservation for our clients because, while there is a risk that bond prices fall, inflation risk, and liquidity risk, fixed income is still seen as a safer investment for capital preservation.

Tax Benefits

Municipal bonds provide tax benefits, with many of them providing both federal and state tax-free principal and interest payments. For our ultra-affluent investors for whom taxes are a major concern, fixed-income investments may provide a way to balance their portfolios with tax-advantaged strategies.

Steady Stream of Cash Flow

One of the greatest advantages of fixed-income strategies is the dependable cash flow that they can provide to our clients. Whether you want the money to be paid out to you, or to facilitate a "laddering strategy" that reinvests those principle and interest payments back into your portfolio, fixed-income products provide some of the most dependable, fixed-rate returns that are available.

Lower Market Volatility

While the federal benchmark interest rate may affect the bond markets, there are far fewer events to cause volatility in fixed-income than in the equity markets. AAA bonds have very little liquidity risk, while the same companies that issue those bonds may see their stock price drop precipitously due to market events.

Guarantees

Many fixed-income products come with guarantees, whether it be the government or the Federal Deposit Insurance Corporation. Even without the guarantee, a bank or corporation that fails to meet its debt obligation will face stiff penalties, lower credit ratings, and a higher interest rate on any future debt instruments that they create. Debt is the fuel of the global economy and what keeps companies growing and moving, so there have been significant regulations and guarantees put into place to ensure debt investors are protected.