How to rebalance your investment portfolio when bond prices fall

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The recent broad selloff in world government bonds amidst anticipation that interest rates in major economies will remain high in the near future, has once again pushed bond volatility to an all-time high. If you are building an investment portfolio that comprises bonds, perhaps it is a good time to evaluate if you should rush to sell them off or..

October 27, 2023 5:34 AMThe recent broad selloff in world government bonds amidst anticipation that interest rates in major economies will remain high in the near future, has once again pushed bond volatility to an all-time high. If you are building an investment portfolio that comprises bonds, perhaps it is a good time to evaluate if you should rush to sell them off or put more money into investing in investment-grade bonds while prices are falling.

A surge in new bond issuances can also lead to falling bond prices. The sudden increase in supply means investors have more options to choose from and issuers have to offer higher yields with lower prices to attract buyers.Rebalancing your investment portfolio is a proactive approach to realigning your investment strategy and risk tolerance to ensure your portfolio is achieving your long-term financial goals in the face of changing market conditions.

Do note that the rebalancing process may incur transaction costs or taxes that may impact your capital gains or losses. Be sure to weigh these costs before executing any trades to realign your portfolio. At the bottom line, your investment strategy should balance out the overall allocations together with the costs associated with them.

 

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