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Advisors Call the End to the Bull Market in Bonds

Many advisors look to other sources besides bonds for generating income, such as dividend-paying equities, equity income mutual funds and annuities, a new survey found.

Nearly two-thirds (63 percent) of advisors believe the three decade-long bull market in bonds is over, or will be within the next year, according to a survey of 200 financial advisors by Incapital, an underwriter and distributor of fixed income securities.

The survey found that advisors have looked at other sources of income in their clients’ portfolios, besides individual bonds. More than half of those advisors use dividend-paying stocks to generate income. Others cited equity income mutual funds (43 percent), annuities (43 percent), bond mutual funds (39 percent) and bonds (38 percent).

Thirty-eight percent of respondents said a rate increase would push them to use more bonds in their clients’ portfolios. Other factors that would encourage more use of bonds included a simplified process to access bonds (32 percent), access to better online tools for evaluating bonds (28 percent) and better education on bond investing (24 percent).

About seven in 10 advisors believe a significant correction is needed for investors to recognize the benefits of fixed income investing, the survey found. Half of advisors said they expect allocations to fixed income or cash to increase over the next year, while nearly a third (29 percent) expect an increase in equities allocations.

On average, advisors’ clients allocate 46 percent to equities, 27 percent to bonds, 14 percent to cash, 9 percent to alternative investments and 4 percent to “other.”

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