Investors reassess bonds as portfolio ballast amid stock-market anxiety

Bonds are drawing fresh attention as investors weigh steadier income against a stock market Fortune described as expensive. The appeal, according to advisers interviewed by Fortune, is that bonds can reduce portfolio swings even when their returns trail high-flying equities.

Fortune described a bond as a loan to a government or company that pays interest over a set period and returns principal at maturity, assuming the issuer remains solvent. The publication noted that many investors understand stocks better than bonds, including how to choose them, buy them and judge their risks.

The trade-off can be stark. Fortune reported that Nvidia shares gained about 39% in 2025 after rising 171% in 2024, while the widely followed 10-year Treasury yielded roughly 4.5% annually. In downturns, the pattern can reverse: Fortune said stocks fell about 38% in 2008 and 19% in 2020, while bonds produced positive single-digit returns.

Why advisers still use bonds

Allan Roth, founder of Wealth Logic and a former McKinsey consultant, told Fortune that investors should hold bonds as a stabilizing part of a portfolio. Roth especially recommended Treasury Inflation-Protected Securities, known as TIPS, because their payouts adjust with the consumer price index.

Richard Carter, vice president of fixed-income products at Fidelity, told Fortune that bonds give investors a clearer payment schedule than many other assets. He said investors know when interest is due and when repayment is scheduled, a feature he described as attractive for older investors seeking income.

Fortune also reported that bonds carry real risks. Prices can fall if an issuer’s finances worsen, investors who sell before maturity can take losses, and default can put principal at risk. The publication pointed to 2022 as a rare bad year for bonds, when inflation rose quickly and overwhelmed many coupon payments, though Fortune said stocks performed worse that year.

Buying bonds has become relatively accessible, according to Fortune. Investors can purchase individual bonds through brokerage platforms such as Fidelity and Schwab, buy on primary or secondary markets, or use low-cost exchange-traded funds that hold diversified bond portfolios.

Treasuries, munis and company debt

Fortune reported that bond specialists still view U.S. Treasury bills as a core holding despite concerns about federal debt. Roth advised short- and medium-term T-bills, while Kathy Jones, Schwab’s chief fixed-income strategist, backed laddering, a strategy that spreads maturities across different dates to reduce exposure to rate changes.

Treasuries also have a tax feature that dividend stocks lack, Fortune reported: their income is exempt from state and local taxes. That can matter more for investors in high-tax states such as New York and California.

Municipal bonds can add another tax advantage because income from bonds issued by cities and local authorities is often exempt from federal income tax, according to Fortune. Jones told Fortune defaults are rare because government entities do not disappear like private companies, but Roth warned that advertised municipal yields can overstate the real return when brokerages include a return of capital in the calculation.

Corporate bonds offer another route, Fortune reported. Investors seeking lower risk can look at bonds from companies rated BBB or better, or funds that hold them, while lower-rated junk bonds pay more to compensate for higher risk.

Jones told Fortune that strong corporate profits make company bonds worth considering now. Roth urged caution, citing General Motors’ 2009 bankruptcy as a reminder that established companies can fail, and told Fortune investors should avoid chasing extra yield in the bond portion of a portfolio.

This story draws on original reporting from Fortune.