How do I diversify my bond portfolio?

To diversify your bonds, choose bonds with different credit qualities, maturities, and issuers (the U.S. Treasury, municipal bonds, corporates, etc.). If hand-selecting the right bonds feels daunting, you can still expose your portfolio to fixed-income investments with a bond-focused exchange-traded fund (ETF) or mutual fund.

What are the different types of Bond diversification?

But diversification goes further than just this mix. Take bonds, for instance: You can think of bond diversification in three main categories: bond type, bond maturity and bond sector. There are three primary categories of individual bonds: municipal, corporate and government. Each bond type has unique characteristics.

Why are bonds important in a diversified portfolio?

Bonds play an important role in a well-diversified portfolio because they tend to balance the potential volatility of higher-risk investments, such as equities . Bonds as an asset class have not historically kept pace with stock market returns, but they do typically experience less short-term price volatility.