When Should You Consider Investing In Bonds (or Fixed Income Instruments)?

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Let's talk about investment bonds or other fixed-income instruments (i.e. fixed deposits) and when should you invest in them.

For those who are not familiar with bonds, it works like a loan (IOU) where you are “lending” your money in exchange for an interest return over a pre-defined duration. After the loan matures, you will get back your principal amount.

The thing about bonds is that while there is a higher certainty in the expected returns as compared to investing in stocks, the very expected return of investing in a bond had been on a decline over the last 2 decades as the central banks all over the world had continued to reduce their interest rates.

As a result, the viability of using and investing in a bond for your portfolio had essentially been decimated over the last two decades as returns plummet to such a low level that the instrument had lost its purpose as a diversification tool as compared to how it performed during the 1980s to 2000s.