Bond Market

Your Investment Portfolio Airbag – Fixed Income

  • 01.11.21
  • Markets & Investing
  • Commentary

January 11, 2021

Doug Drabik discusses fixed income market conditions and offers insight for bond investors.

Just this last week, I was asked, “are bonds only airbags for the foreseeable future”? My instinctive response I’m sure, had a lot to do with understanding the real underlying significance of what could be perceived as a dismissive market induced paradox. I knew the question was invoked due to the dismal puny yields available in this low rate environment. However, the question can be akin to asking, “is water “just” a hydrating substance”?

Simply, “yes”, water is just a hydrating substance… but a substance vital to one’s survival. And “yes” bonds may “just” be airbags for your investment portfolio but the power of the analogy should resonate fixed income’s importance! Fixed income remains the core component and foundation of wealth preservation regardless of the current interest rate environment.

I hope you never need to employ your car airbags because if you do, you are potentially in a catastrophic situation of survival. In the same manner, I hope your fixed income is held to maturity and remains untouched until maturity, quietly protecting your wealth in the background. Additional income is a bonus and we all hope that fixed income is not needed in an emergency situation, but if it is, we are all thankful it is supporting our investment needs.

This environment makes it easy to drift from disciplined investing. Interest rates are near historic lows and the stock market is breaking records seemingly every week. As you accumulate more wealth with rising stock prices, continually correct allocations by protecting that newly acquired wealth with fixed income.

When you shop for a car, the salesperson rarely talks about the impact capacity of the bumpers, the deployment time of the airbags or the functionality of the seat belts. He’s busy demonstrating the top speed, highlighting the horsepower, demonstrating the speaker quality, showing off the sunroof and having you sit in the plush leather seats. Yet all the bells and whistles don’t diminish the absolute necessity of the safety features.

It is not always fun to talk about bonds because they don’t build your wealth the way stocks, MLPs, real estate or your business does. But when the markets correct, or a pandemic limits your business’s effectiveness, having your fixed income airbag in place is vital to your investment health and sometimes survival. Please don’t lose sight of the importance of fixed income allocation no matter how distracting the markets can cloud things.

To learn more about the risks and rewards of investing in fixed income, please access the Securities Industry and Financial Markets Association’s “Learn More” section of, FINRA’s “Smart Bond Investing” section of, and the Municipal Securities Rulemaking Board’s (MSRB) Electronic Municipal Market Access System (EMMA) “Education Center” section of

The author of this material is a Trader in the Fixed Income Department of Raymond James & Associates (RJA), and is not an Analyst. Any opinions expressed may differ from opinions expressed by other departments of RJA, including our Equity Research Department, and are subject to change without notice. The data and information contained herein was obtained from sources considered to be reliable, but RJA does not guarantee its accuracy and/or completeness. Neither the information nor any opinions expressed constitute a solicitation for the purchase or sale of any security referred to herein. This material may include analysis of sectors, securities and/or derivatives that RJA may have positions, long or short, held proprietarily. RJA or its affiliates may execute transactions which may not be consistent with the report’s conclusions. RJA may also have performed investment banking services for the issuers of such securities. Investors should discuss the risks inherent in bonds with their Raymond James Financial Advisor. Risks include, but are not limited to, changes in interest rates, liquidity, credit quality, volatility, and duration. Past performance is no assurance of future results.

Stocks are appropriate for investors who have a more aggressive investment objective, since they fluctuate in value and involve risks including the possible loss of capital. Dividends will fluctuate and are not guaranteed. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

Important Disclosures

Saling Wealth Advisors is an SEC registered investment adviser located in Louisville, Kentucky. Saling Wealth Advisors may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. Saling Wealth Advisors’ web site is limited to the dissemination of general information pertaining to its advisory services, together with access to additional investment-related information, publications, and links. Accordingly, the publication of Saling Wealth Advisors’ web site on the Internet should not be construed by any consumer and/or prospective client as Saling Wealth Advisors’ solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation, over the Internet. Any subsequent, direct communication by Saling Wealth Advisors with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For information pertaining to the registration status of Saling Wealth Advisors, please contact the state securities regulators for those states in which Saling Wealth Advisors maintains a registration filing. A copy of Saling Wealth Advisors’ current written disclosure statement discussing Saling Wealth Advisors’ business operations, services, and fees is available at the SEC’s investment adviser public information website – or from Saling Wealth Advisors upon written request. Saling Wealth Advisors does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Saling Wealth Advisors’ web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly.

This website and information are provided for guidance and information purposes only. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy. This website and information are not intended to provide investment, tax, or legal advice.