Investors can continue to achieve their fixed income goals in a low yield environment by blending multiple bond strategies based on their investing needs.

What role do bonds play in your portfolio?

 

Diversification is harder to find.

Diversification

Bonds have historically provided strong diversification from stocks, but today that diversification is even harder to find. The correlation of bonds to stocks has increased 310%*.

Diversify risk from equity exposure

 


 

Interest rate risk is higher.

A Potential Source of Protection

While many investors look to bonds for stability, the interest rate risk of traditional bonds is 46% higher than it was in 2009. Even a small increase in interest rates could affect the value of the bonds in your portfolio.

Guard against interest rate risk and credit events

 


 

Yield is more elusive.

Income

Many investors invest in bonds for income, but with interest rates at record low levels, yield is more elusive. Less than 15% of bonds yield more than 4.

 

Generate attractive income potential

* Source: Morningstar. As of 12/31/14. Traditional bond funds are represented by the Morningstar Intermediate-Term Bond fund category average. Stocks are represented by the S&P500. Based on the 10 year correlation. Past correlations are no guarantee of future correlations.

† Source: Barclays Live. As of 12/31/14. Traditional core bonds are represented by the Barclays U.S. Aggregate bond index. Data based on modified duration.

‡ Sources: BlackRock Investment Institute, Barclays and Thomson Reuters, 201. As of 12/31/14.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained visiting the iShares ETF and BlackRock Mutual Fund prospectus pages. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

The BlackRock funds are actively managed and their characteristics will vary.

Active funds typically charge higher fees than index-linked products due to increased trading and research expenses that may be incurred.

Bond values fluctuate in price so the value of your investment can go down depending on market conditions. The two main risks related to fixed income investing are interest-rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to make principal and interest payments.

Securities with floating or variable interest rates may decline in value if their coupon rates do not keep pace with comparable market interest rates. The Fund’s income may decline when interest rates fall because most of the debt instruments held by the Fund will have floating or variable rates.

International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/ developing markets, in concentrations of single countries or smaller capital markets.

Diversification and asset allocation may not protect against market risk or loss of principal.

Investing in long/short strategies presents the opportunity for significant losses, including the loss of your total investment. Such strategies have the potential for heightened volatility and in general, are not suitable for all investors.

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