The challenge in today’s market environment is the risk of holding bonds. While bonds have historically been a safe-haven investment, ultra-low interest rates have made them a lot riskier in the eyes of Warren Buffett and other prominent voices. Meanwhile, the tendency to turn to riskier bonds, such as junk bonds, negates their safe-haven status of these investments.
There are several alternative sources of income to consider:
Use the Dividend Screener to find high-quality dividend stocks. You can even screen stocks with ratings above a certain threshold.
Investors may also want to consider diversifying their bond holdings across issuers and geographies. For example, a diverse set of developed market, emerging market and corporate bonds will have less risk than exclusively holding U.S. corporate bonds. Many mutual funds make this kind of diversification easy to achieve at a relatively low cost.