Optimizing retirement portfolios: A high-level look at the benefits of adding high-yield bonds.
Are your retirement savings allocated efficiently? Are you setting-and-forgetting retirement plans? Have you been over-reliant on traditional asset classes for your plan line-ups? Now may be the time to re-imagine retirement plan construction.
We are the Multi-Asset Solutions Team, New York Life Investments’ specialists in multi-asset investing. We assist our partners in their pursuit of investment success. We know there is no shortage of research speaking to retirement planning best practices. However, much of this work focuses on traditional asset types, excluding or underrepresenting other potentially viable options. We believe that there is room for improvement. And opportunity.
In our free white paper––Market Trends and Analysis: Exploring the benefits of adding high-yield bonds and other non-core assets to a retirement portfolio––we give you an in-depth look at the benefits of high-yield bonds. For instance, in our white paper you’ll find research that shows that adding a meaningful allocation of high-yield bonds to a classic 60%/40% stock/ investment-grade bond portfolio has historically improved risk-adjusted performance.
Fact is, a well-constructed, optimized retirement portfolio that includes high yield bonds can help reach long term retirement goals. A recent Morningstar report shows fund replacements provide significantly higher risk-adjusted returns than the funds that were replaced.*
Why hasn’t this approach been utilized more? The complexity of markets and uncertainty of outcomes understandably steer investors to traditional common stock and investment-grade bond offerings. However, this approach may overlook diversified sources of return that may help investors better achieve their long-term goal of saving for retirement.
There’s also the matter of perception. Some managers believe that bonds do not add value to a portfolio. But this overlooks the benefit of diversification. A mix of uncorrelated assets offering differentiated sources of return reduces portfolio risk, provides a hedge against market volatility, and can increase return potential in the long term, and all else equal, returns are further improved.
At New York Life, we believe there’s no one right way to invest. We advocate prioritizing good investor behaviors over a singular focus on maximizing returns. A strategic plan that can be followed during good times and bad is often the most important determinant of investment success.
So be sure to download our white paper to see why it’s high-time for high yield.
Diversification does not ensure a profit or protect against a loss in a declining market.
“Change is a Great Thing” by David Blanchett, PhD, CFA, CFP, Michael Finke, PhD, CFA and Jim Licato, 2019 Morningstar, Inc. All Rights Reserved
“New York Life Investments” is both a service mark, and the common trade name, of certain investment advisors affiliated with New York Life Insurance Company.