Defined contribution plan participants are notoriously bad about changing their 401(k) allocations, but retirement advisors and wealth management companies are nonetheless preparing their plan sponsor-clients for an inevitable rise in interest rates.
Fixed-income investors may find this annoying, of course, because they embraced the long-term bond market after repeatedly hearing assurances from the Federal Reserve that it planned to hold rates down to record lows, which drove up bond prices and yields.
Michael Temple, senior vice president and director of credit research, U.S., for Pioneer Investments in Boston, said his firm advocates for “shorter duration fixed-income, like high-yield bonds and bank loans that I think some people felt were too risky.”
“I understand people saying they had a bad experience with high yield in 2008,” Temple said. “The reality of the next phase of the market is the risk associated with high-yield and corporate credit is less risky than long-duration (bonds).”