Page 6 - Wealth-Adviser-Issue-123 (FWP)

ISSUE 123
OCTOBER 2025

By prioritising understanding over assumption, process over

prediction, and balance over bravado, Australian investors and

their advisers can ensure the evolving role of bonds continues

to uphold its core promise: a steady hand through both calm and

storm, tailored to the needs of each investor’s unique journey.

operational risk should remain front of mind. Less-liquid Active engagement and ongoing education are essential.
markets or complex instruments can bring additional yield, Rather than see bonds as static or secondary, continue to
but often at the cost of increased volatility and greater assess their dynamic role in addressing both present risks
difficulty in quickly realising capital in times of need. and future opportunities. It is this balanced, reflective
approach—not promotion or blanket caution—that will serve
A New Perspective: Bonds in the Modern Australian investors best as portfolios continue to evolve.
Portfolio
Today, viewing bonds as “ballast and opportunity”—rath- Conclusion
er than simply as safe havens—is central to building modern As the world navigates a period of profound change
portfolios. Bonds have shown they can play multiple roles: marked by economic uncertainty, policy experimentation,
stabilisers during equity drawdowns, reliable sources of and new investment paradigms, bonds continue to earn
income in low-growth or deflationary periods, and even their place within diversified portfolios. The lessons of
tactical opportunities for capital gains in times of market recent years have made clear there is no one-size-fits-all
stress or falling yields. solution—but equally, the bond market remains an invalu-
However, portfolio construction must now respect the able arena for managing risk, securing income, and laying
nuances of correlation and liquidity. As one Firstlinks piece the groundwork for future resilience.
stressed, “the traditional 60/40 equity and bond allocation By prioritising understanding over assumption, process
has long been considered a benchmark for balanced invest- over prediction, and balance over bravado, Australian inves-
ing. The challenges of 2022… underscored the importance of tors and their advisers can ensure the evolving role of bonds
re-examining this framework.” Rather than relying slavishly continues to uphold its core promise: a steady hand through
on old formulas, advisers are weighing up the relative merits both calm and storm, tailored to the needs of each investor’s
of different assets, durations, and risk tolerances to create unique journey.
solutions that meet the unique needs of today’s and tomor-
row’s investors.
Central to this perspective are several pragmatic lessons Reference List
for the retail investor: • “Bonds are Copping a Bad Rap”, Eric Souders, Firstlinks, 16 October 2025
• Carefully understand the risk/return profile of each fixed • “Six Key Themes Driving Bond Markets”, Firstlinks, 17 August 2025
income exposure. • “Five Key Themes for the Second Half of the Year – Fixed Income”,
• Don’t chase yield without considering the possibility of Firstlinks, 26 August 2025
capital losses. • “Australia’s Bond Market in a Volatile World”, Reserve Bank of Australia,
• Use diversification—across issuers, regions, maturities, 11 June 2025
and currency—as both an offensive and defensive strategy. • “Australian Bonds Seen Outperforming in 2025”, Income Asset
• Maintain a balanced view of income needs, liquidity Management, 1 September 2025
requirements, and growth aspirations. • “The New Role of Stocks and Bonds in 2025”, BlackRock, 10 February
• Seek professional guidance to update and adapt fixed in- 2025
come exposures as policy, markets, and personal circum- • “Fixed Income Finds Sweet Spot Amid RBA Pause”, InvestorDaily, 7
stances evolve. October 2025

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