The Role of Debt Asset Class in Building a Diversified Portfolio
Introduction Diversification is a key strategy in portfolio management that helps investors manage risk and achieve more stable returns. While equities often take the spotlight, debt instruments play a crucial role in balancing a portfolio. Debt assets, such as bonds and fixed-income securities, provide stability, regular income, and a hedge against market volatility. Understanding Debt Asset Class Debt investments involve lending money to an entity (such as a government or corporation) in exchange for periodic interest payments and the return of principal upon maturity. The most common types of debt securities include: Government Bonds : Issued by governments, these are considered low-risk investments. Corporate Bonds : Issued by companies to raise capital, offering varying degrees of risk and return. Municipal Bonds : Issued by local governments, often providing tax advantages. Treasury Securities : Backed by the government, these are among the safest debt investments. ...