Why bonds now ?

The end of the tunnel could be in sight after a tough six months for investors, according to Flavio Carpenzano, Investment Director at Capital Group, speaking in the first in a new series of the Investing For The Long Term podcasts for Delano and Paperjam. He focused on bonds, explaining how they might fit into investment strategies that could suit the current and future economic environment.

Mr Carpenzano explained why these securities could still be considered an important element of a balanced portfolio. He explained how a portfolio of bonds blended with shares brings diversification and may help limit the risk from a few investments going bad.

He commented on the unique market circumstances seen in the first half of this year. Covid-related supply-chain problems were followed by Russia’s further invasion of Ukraine, creating what Mr Carpenzano called a “perfect storm” of circumstances.

During this period, holding cash deposits in the bank may have appeared a fruitful investment choice, but he went on to say why this would not last forever – especially in the context of high inflation. He explained how bonds, combined with shares, could offer a meaningful opportunity for managing assets in a period of moderate and high inflation.

In the first of the monthly podcast series, Mr Carpenzano also touched on why it is important to have clear investment strategy objectives. Once these are understood, a portfolio can be built using a diverse range of assets; and within each asset class a range of different types of investments could then be considered.

It is essential, however, to understand the risks inherent in each strategy and recognise that there is no formula that works in every circumstance. But, over the long term, history has indicated that this might be a wise investment strategy.

This is the first episode of the second 10-part podcast series Investing For The Long Term featuring Capital Group. These monthly podcasts, produced and hosted by Delano and Paperjam, explain some of the key challenges investors are facing and the investment opportunities related to those challenges. The first series can be accessed here.

To listen to Capital Group’s podcasts, click here