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What Buffett’s “Bleak Future” for Bonds Means for Fixed Income Investors

Bonds are a mainstay of most diversified investment portfolios. In addition to generating income, bonds tend to be less volatile than equities and help diversify a portfolio. Certain types of bonds—such as municipal bonds—also offer tax advantages.

Over the past 40 years, bond prices have risen sharply higher and yields have fallen to previously unthinkable lows, including negative yields in some cases. The vast amount of spending in response to the COVID-19 pandemic has consumers and investors concerned about inflation for the first time in more than a decade.

Let’s take a look at Warren Buffett’s opinion on bonds and other fixed income investments as discussed in Berkshire Hathaway’s highly anticipated annual letter to shareholders.

Don’t forget to explore our Fixed Income Channel to learn more about fixed income investment concepts and trends.

Bonds Face a “Bleak Future”

The Central Bank’s Response

Treasury bill yield
10-Year Treasury Yields- Source: YCharts

Alternatives to Fixed Income

The Bottom Line