Help Lower Overall Portfolio Risk with Short-term Bonds

Short-term bond strategies are attractive now for investors seeking to enhance yield while defending against volatile markets.  

An increase in uncertainty and market volatility has many investors looking for strategies to reduce risk. We believe short-term bond strategies are attractive now, offering the potential for enhanced yield while also defending against volatile markets. 

New research from Morningstar confirms that bonds have been an effective way to hedge stock market risk.  “The goal is when stocks tumble, that you have something in your portfolio with the ability to at least hold its ground, or maybe even earn a little bit,” said Christine Benz, Morningstar’s director of personal finance.   This is consistent with our belief that bonds are a critical component to a true diversified asset allocation.   

An actively managed short-term income strategy may offer the following benefits:  

  • Investors seeking potential defense against volatile markets should consider short-term bonds. The short-term asset class (Treasuries, CDs, and Corporate bonds maturing within 3 years or less) can offer low duration, or limited exposure to interest rate risk, and the potential for total returns above traditional cash investments.
  • Short-term bonds may offer a way to lower-volatility and minimize drawdowns during periods of market stress, compared to higher-risk assets like stocks.  
  • Particularly in an uncertain market, maintaining liquidity is important. Short-term bond strategies may serve as “dry powder” for future buying opportunities.    

For investors seeking to manage risk amid uncertainty, a short-term bond strategy can offer a way to lower overall portfolio risk, seek to generate income, and maintain liquidity.


Past performance may not be indicative of future results. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that their future performance will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. The statements made in this newsletter are, to the best of our ability and knowledge, accurate as of the date they were originally made. But due to various factors, including changing market conditions and/or applicable laws, the content may in the future no longer be reflective of current opinions or positions. Any forward-looking statements, information and opinions including descriptions of anticipated market changes and expectations of future activity contained in this newsletter are based upon reasonable estimates and assumptions. However, they are inherently uncertain and actual events or results may differ materially from those reflected in the newsletter. Nothing in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice. Please remember to contact Signet Financial Management, LLC, if there are any changes in your personal or financial situation or investment objectives for the purpose of reviewing our previous recommendations and/or services. No portion of the newsletter content should be construed as legal, tax, or accounting advice. A copy of Signet Financial Management, LLC’s current written disclosure statements discussing our advisory services, fees, investment advisory personnel and operations are available upon request.

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