Blend your portfolio to diversify risk

By Joanna Howley, manager of the Merrill Lynch High Income Bond fund Research has shown augmenti...

By Joanna Howley, manager of the Merrill Lynch High Income Bond fund Research has shown augmenting investment grade bonds with high-yield can actually help reduce total portfolio risk, because of the different characteristics of the asset classes. High-yield bonds typically do well in a strong economic environment, while the reverse is true of investment grade. As a result, we favour a blended portfolio, conservatively positioned with between 65% and 80 % in investment grade bonds and the balance in high yield bonds. This strategy is based on the belief that non-investment g...