Bonds and Fixed Income Investments

Learn how our team makes recommendations for the portfolio we call “Foundation Income.”

We like the steady income and knowing that someone is watching out for our needs.

Benefits of Bonds and Bond Funds

Bond and bond mutual funds provide benefits that may include:

  • Providing steady income
  • Low correlation with equities
  • Some stability in a chaotic investment environment

Challenges of Bonds and Bond Funds

In today’s world, investors in bonds and bond funds face many challenges:

  • Today, we live in a low interest rate environment
  • Inflation eats away at our purchasing power
  • Investments that provide both income and some growth potential are rare

Staggering Statistics

Interest rates are much lower than any time in our lifetimes. Low interest rates make it difficult to generate income from bonds, bond funds and other fixed income investments.

Effective Federal Funds Rate % by decade:

Statistic accurate as of March, 2021. Source: St Louis Fed

Federal funds rate is the target interest rate set by the Federal Open Market Committee (FOMC) at which commercial banks borrow and lend their excess reserves to each other overnight.

We Call it Foundation Income

Foundation income is the name we give to our bonds and bond funds portfolio.

Foundation Income is the name we give to our bond and bond funds portfolio.

Foundation Income Includes

Foundation income is a diverse pool of fixed income and total return investments in mutual funds, electronically traded funds (ETFs) and possibly electronically traded notes (ETNs). Foundation Income uses the research of the Chartered Financial Analysts (CFAs) at Litman Gregory, plus our own investment policy committee.

Investments Other than Just Corporate Bonds

Foundation Income is diverse. It may invest in U.S. Treasuries, corporate bonds (and other debt investments), foreign companies’ debt, sovereign foreign debt, foreign currencies, floating rate, fixed rate, inflation protected securities, real estate investment trusts (REITs), master limited partnerships (MLPs), and/or absolute return, among other investments.

In today’s low interest rate world, we have to be both creative and qualitative when constructing a fixed income solution.

We are both creative and qualitative when constructing our fixed income portfolio.

In-depth Due Diligence on Bonds, Bond Funds and Fixed Income

We believe the right way to invest is to diversify by strategy. Our team takes the time to gain insight into what decisions are being made, and why. Even more than that, we take time to understand how the decisions are being made. Various investment managers at a particular mutual fund, ETF or ETN have strengths and weaknesses. We want to find a mix of managers who are both confident and humble. Furthermore, we want access to the people making the decisions.

We work hard to find some of the best, highest conviction, most consistent investment minds in the world. Our independence gives us the ability to move quickly, without a conflict of interest, in the best interest of our clients. This process is sophisticated and has taken us decades to develop. But, for our clients, we make the investment decisions simple.

We implement sophisticated decisions simply.

Gap Analysis

We focus on our client’s personal financial plan.

For the investment policy committee, our due diligence and investment selection process is sophisticated.

For our clients, the decision is simple.

We focus on our clients’ personal financial plan. How much risk is right for you to achieve what is most important to you? What are your goals? Where are you at? And what are the gaps between here and there? Plus, we want to invest in alignment with your values and in order for you to make the most of your relationships. For many of our clients, the foundation of their retirement income is the Foundation Income portfolio.

Our Process for Investing in Bonds and Bond Funds

We follow a four-step process with Foundation Income.

Quantitative Analysis

We start with the financial metrics, including the amount of return delivered per unit of risk.

Qualitative analysis

Fully understand the strategy and make sure the manager is acting with high conviction and consistency.

Portfolio Composition Analysis

Determine the optimum allocation for the investments.

Hand with Money

Ongoing Due Diligence

For our clients, this is all invisible. For our investment policy committee, the work never ends.

Mutual Funds & ETFs are sold by prospectus. Investors should carefully consider the investment objectives, risks, charges and expenses of the mutual fund or ETF. This and other important information is contained in the fund prospectus which can be obtained from your financial advisor and should be read carefully before investing. Bonds are subject to credit and interest rate risk (when rates rise, bond prices generally fall). The return and principal value of a bond will fluctuate as market conditions change. If sold before maturity, an individual bond may be worth more or less than its original cost. 

You May Also be Interested

To learn more about how we make investment decisions, click one of these links:

Investment Advice Services

Investment Advice

Asset Allocation & Portfolio Management

Balance the risk and reward between investments to achieve your real-life financial goals.

Stock & Stock Fund Investments

We build high-quality, actively-managed equity portfolios using academically-proven techniques.

Concentrated Equity Owner

Concentrated Equity Strategies

If you have a large amount of your net worth in the equity of a single company, learn how to reduce your risk, reduce your taxes, protect and grow your wealth.

Single Stock Diversification

Learn how we build an investment portfolio around your large equity position and help you diversify—not double-down (or worse) your risk.

Single Stock Diversification

Stock Option Planning

Learn about how we manage incentive stock options and nonqualified stock options to help you grow and protect your wealth, reduce your taxes, and achieve your personal goals.

Hedging Strategies & Alternatives

Learn how we carefully select some alternative investments to provide income and growth for some clients.

Hedging Strategies
Investment Performance Analysis

Investment Performance Analysis

Learn how we perform investment performance analysis and provide our clients access to this information, on demand, with great technology.

IRAs: Roth, Rollover, Inherited and More

Learn how we solve the complex problem of providing retirement income and reducing income taxes.

Financial Planning
Annuity considerations

Annuities of All Kinds

For some clients, an annuity may provide a safe and prudent retirement income. We have independent, expert annuity agents with a huge array of providers to choose from.

401K Advice for Individuals and Businesses

Learn how we provide retirement plan advice for our clients 401k accounts, and for employers who want to provide advice to their employees.

401k Advice

Learn more!

An initial conversation with one of our experts is always free of charge.

Talk with an Expert

Our wealth management approach may be different from experiences you have had with other advisors.

Contact Us

Attend an upcoming event

We offer a broad array of events that broaden our knowledge and experiences.

View All Events

Download our Investment Philosophy Statement

The right way to invest is to diversify by strategy, remain consistent, and maintain high conviction.