Why Everyone Is Talking About Bonds Right Now

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Bonds are often described as the “defensive” part of an investment portfolio, but that doesn't mean they can't lose value. With bond yields and interest rates getting plenty of attention, understanding what you actually own inside your super can help make sense of why even defensive investments sometimes go backwards.

In this episode, Scott and Phil go back to basics on bonds. They explain how governments and companies use bonds to borrow money, why different bonds pay different rates of interest, and the role fixed income can play inside superannuation and retirement portfolios.

You’ll learn:
What a bond actually is and why governments and companies issue them
Why higher-risk borrowers generally need to offer higher interest rates
Why bond prices can fall when interest rates rise
How the length of a bond can affect its sensitivity to changing interest rates
Why bonds can still play a defensive and income-producing role within a diversified portfolio, even when their value temporarily falls

This episode is for Australians who want to better understand the defensive side of their super or investment portfolio. Bonds aren't risk free, but understanding how interest rates, credit risk, income and diversification interact can help explain why they're commonly used alongside growth assets in a broader portfolio.

00:00 Why Bonds Are Everywhere
00:30 What Is A Bond?
01:31 Why Issue Bonds?
02:01 How Bonds Work
02:45 Bond Yields
03:06 Government Bonds
03:31 Bond Maturity
04:00 Credit Ratings
04:57 Bond Auctions
06:01 Bonds & Your Super
06:32 Defensive Portfolios
06:58 Can Bonds Fall?
08:11 Bonds Going To Zero
09:09 Bond Types
09:28 Rates ↑ Bonds ↓
10:16 Bond Duration
10:38 Bond Income
11:52 Why Hold Bonds?
13:04 When Everything Falls
13:39 Government Debt
14:26 Rising Bond Yields
15:12 Defensive Assets
16:49 Bonds Still Have Risk
17:06 Inflation Matters
17:38 Final Thoughts

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General advice only. This content does not consider your objectives, financial situation or needs. Consider whether the information is appropriate for you and read our FSG before acting. Past performance is not a reliable indicator of future performance.
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