As we approach the end of the first quarter of 2023 uncertain market conditions continue to prevail. Right on the heels of the failure of Silicon Valley Bank we saw where Credit Suisse was acquired by UBS. Investors will have to continue to navigate choppy waters and analyze their portfolios. It’s never been more important to make sure your money is working as hard as possible for you. In the current environment with rising interest rates an investor may wonder what to do when their fixed income investment matures.
Firstly, you should have an understanding of how the markets have changed since your previous investment. Now is a great time to analyze your portfolio and consider if your investment allocation and position works with the current environment and your financial goals. Consider if your investments still make financial sense. Watching the market value of your portfolio decline in volatile times can be uncomfortable but before a full realignment ask yourself why you invested in the first place. If your holdings still help and align with you achieving your long-term investment goal, hold tight.
After analyzing your portfolio your next step should be to see what is available and choose the best available investment that meets your risk appetite. Once you have determined your appetite, investigate which bonds fall in line with your long-term investment goals. Now is not the time to panic buy, sell or make dramatic unnecessary changes.
A few tips that a fixed income investor can use when searching for new opportunities. Look for shorter dated bonds. This will help navigate price volatility as when interest rates are rising the prices of shorter dated bonds are usually less affected than those of longer dated bonds.
Secondly investors can look for new bond opportunities that are coming to market. New bonds are being issued with attractive coupons. These issues are paying coupons even higher than bonds that were issued in 2022. For the investor who remained liquid now is a great time to pivot into opportunities that are fresh to the market.
If some of the newer issues do not fall within your risk appetite there is still an opportunity to lock in favourable yields on previously issued bonds. Investors can also examine bonds from high credit quality issuers and purchase these bonds at lower prices or even at a discount.
Investors should remain calm and always stay focused on their overall financial plan. Keep an eye out for opportunities that work with your personal portfolio. Do your research on the assets in your portfolio and rely on sound information. As always seek advice from your licensed financial advisor.
Christine Rankine is the Manager -Personal Financial Planning at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm
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