Interest Rates, Low Yields Affect Members’ Bond Allocations


May’s Asset Allocation Survey special question asked AAII members what predominately influences their decision to increase or reduce exposure to bonds and bond funds. About 38% of respondents said interest rates influence their bond allocation. Approximately 13.9% said that current low yields affect their decision. Roughly 12% of respondents noted that they do not allocate to bonds at all. Other responses were evenly distributed among factors such as market volatility, market valuations or behavior, expected withdrawal, rebalancing and the economy.

Here is a sampling of the responses:

  • “I will invest in bond funds when I feel the value in security outweighs the risks of owning only stocks.”
  • “I’ve been staying away from bonds for several years, I just don’t like their dynamics right now.”
  • “My allocation of bonds is based on current economic conditions and my portfolio mix.”
  • “Interest rates. I buy bonds and hold them to maturity. When interest rates are so low that utility stocks are clearly a better buy, I don’t renew in bonds.”

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