Stock-heavy portfolios might be right for some investors, but not all—especially those nearing retirement. Adding bonds can help temper the risks of the stock market, but the right mix for you might depend on what you already own and what you need for the future. What’s missing from your portfolio?
Feeling Lucky Doesn’t Guarantee You’ll Be Lucky
You never know what your stock investment returns will look like. Stocks have growth potential and can help you stay ahead of inflation, but what if the stock market hits a speed bump just when you need the money?
Instead of just hoping for the best returns, make a plan for how your investments can work best together. A mix of stocks and bonds is a smart way to prepare for market risks—while still providing the return potential you need for the future.
Funds to Consider
Diversified Bond Fund
Inflation-Adjusted Bond Fund
Bonds Aren’t Boring
Bonds aren’t as flashy as big-name stocks, and they don’t always provide headline-making performance (whether that’s up or down). But they serve an important role in most portfolios.
Many investors start with a core bond mutual fund—one with broad, diversified exposure to investment-grade securities. Then they may choose to add other bond funds depending on their needs (short- or long-term time frames, inflation hedging, income needs, etc.).
Funds to Consider
Diversified Bond Fund
Inflation-Adjusted Bond Fund
Short-Duration Strategic Inflation Income
Bonds and Income: A Match Made in…Retirement
Many investors scale back on stocks and add bonds as they approach retirement age. Why? Bonds’ interest payments make them an attractive option for converting a retirement nest egg to a stream of income.
Stocks might provide better return potential (along with a higher risk of losses, of course), but most don’t provide income the same way a bond can. Bonds can also help you hedge against market risk from the remaining stocks in your portfolio, as well as help you reduce your tax burden.
Funds to Consider
Short-Duration Strategic Inflation Income
High-Yield Municipal Fund
Some Bonds Are Just (Tax) Friendlier
With the potential for higher taxes from new policies and government budget shortfalls, you might decide to ease your tax burden wherever you can. Municipal bonds (munis) are usually exempt from federal taxes. Taxable bond funds might provide higher returns, but you’ll still have to pay taxes. Additionally, some munis also help you avoid the alternative minimum tax.
Funds to Consider
Intermediate-Term Tax-Free Fund
High-Yield Municipal Fund
Next Step: Explore These Funds
Diversified Bond Fund
For investors who need a primary core bond fund and who seek diversification, attractive return potential and lower portfolio volatility
Offers diversification potential for equity-heavy investors
Invests in high-quality U.S. bonds across a variety of sectors
Provides a solid foundation for a diversified portfolio
Does Diversified Bond Fund fit into your portfolio?
Want to talk through your options?
Inflation-Adjusted Bond Fund
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For investors who want to combat the effects of inflation and preserve their purchasing power over time
Designed to outpace inflation, which can help preserve purchasing power
Provides high-quality diversification for equity portfolios
Seeks to deliver positive real returns with relatively low volatility
Does Inflation-Adjusted Bond Fund fit into your portfolio?
Want to talk through your options?
Intermediate-Term Tax-Free Bond Fund
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For investors who seek to avoid alternative minimum tax (AMT) exposure and receive monthly federal tax-free income (see additional information for this fund)
Offers a history of consistent tax-advantaged income designed to help preserve wealth
Features low correlations to equities (don’t move in line with the stock market), which may help diversify a stock-heavy portfolio
Actively managed by municipal bond experts who seek to anticipate and adjust to changing market conditions
Does Intermediate-Term Tax-Free Bond Fund fit into your portfolio?
Want to talk through your options?
Short Duration Strategic Income Fund
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For investors in need of income who are concerned about rising interest rates
Diversifies sources of income to seek attractive yield regardless of the interest rate environment
Features less interest rate risk than longer-duration fixed-income options
Features lower credit risk than high-yield options
Does Short Duration Strategic Income Fund fit into your portfolio?
Want to talk through your options?
High-Yield Municipal Fund
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For income-seeking investors comfortable with increased interest rate risk
Offers a history of attractive tax-advantaged income
Features low correlations to stocks, which may help diversify a stock-heavy portfolio
Actively managed by muni experts who seek out the bonds they believe offer the best return/risk trade-off
Does High-Yield Municipal Fund fit into your portfolio?
Want to talk through your options?
Explore All Funds
Need more options? Everyone's situation is different, so we offer a variety of mutual funds to build a diversified portfolio.
Diversified Bond Fund
The value and/or returns of a portfolio will fluctuate with market and economic conditions.
Investments in fixed income securities are subject to the risks associated with debt securities including credit, price and interest rate risk.
Inflation-Adjusted Bond Fund
Investments in fixed income securities are subject to the risks associated with debt securities including credit, price and interest rate risk.
In certain interest rate environments, such as when real interest rates are rising faster than nominal interest rates, inflation-protected securities with similar durations may experience greater losses than other fixed income securities. Interest payments on inflation-protected debt securities will fluctuate as the principal and/or interest is adjusted for inflation and can be unpredictable.
The prospectus contains very important information about the characteristics of the underlying security and potential tax implications of owning this fund.
Intermediate-Term Tax-Free Bond Fund
Interest rate changes are among the most significant factors affecting bond return. When rates decline, bond prices rise and the fund may generate less income. When rates rise, bond prices fall. Depending on your tax situation, investment income may be subject to state and local taxes and the federal alternative minimum tax.
Fund shares are not guaranteed by the U.S. Government.
High-Yield Municipal Fund
The lower-rated securities in which the fund invests are subject to greater default and liquidity risk, because the issuers of high-yield securities are more sensitive to real or perceived economic changes.
Past performance is no guarantee of future results. Investment returns will fluctuate and it is possible to lose money.
Generally, as interest rates rise, the value of the bonds held in the fund will decline. The opposite is true when interest rates decline.
Diversification does not assure a profit nor does it protect against loss of principal.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.
This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.
