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BlackRock launches survey on American understanding of fixed income investing

May 12, 2017
By BlackRock

In changing interest rate environment, some critical knowledge gaps about fixed income investing. Confusion abounds over impact of rates and the need to diversify. Call to action for advisors: Urgent opportunity exists as 44% of “knowledgeable” investors say “can’t lose your money” in fixed income.


New York, May 9, 2017 – In a changing interest rate environment, many Americans with investments lack a good understanding of the impact of rates on their portfolios – and even many who claim to be “knowledgeable” about fixed income have fundamental misconceptions about those investments, according to new research from BlackRock (NYSE: BLK).

BlackRock’s market view is that interest rates will rise from historic lows in coming months and years, making an already complex fixed income investing environment even more so.

“Many Americans appear to lack sound basic knowledge about fixed income investing and the role fixed income plays in their portfolio,” said Jeffrey Rosenberg, BlackRock’s Chief Fixed Income Strategist. “They need to be aware of some hidden risks. After years of declining and relatively low interest rates, the prospect of rising rates represents a sea change for investing, yet many Americans don’t understand what this change could mean for investing strategies.

“Rising rates have the potential to touch all segments of the markets, not just fixed income, so it’s key for investors to seek out information so that they can fill any knowledge gaps regarding this critical trend,” said Mr. Rosenberg.

Interest rates and bond prices:  Misunderstanding the link

The BlackRock survey was conducted from April 21 to 23, and covered 417 Americans with $50,000 or more in investible assets.  Nearly one third (31%) of those surveyed – and 44% of those who consider themselves knowledgeable about fixed income – incorrectly believe that when it comes to fixed income investing, “you can’t lose your money.”

Only about three in 10 (31%) correctly noted that if interest rates rise, the effect on the fixed income investments that investors already own is negative (when interest rates rise, bond prices fall).

But more than twice as many (68%) got the link between rates and prices wrong:  35% of those surveyed said there is a positive effect on current fixed income investments when rates rise, while 33% said it makes no difference.  Even investors claiming to be knowledgeable about fixed income investments have knowledge gaps:  37% said that rising rates have a positive effect on current fixed income investments, and 27% said it makes no difference.

“These insights demonstrate the urgent opportunity that exists for financial advisors,” said Hollie Fagan, Head of BlackRock’s dedicated Registered Investment Advisor Business and Retail Investor Platforms. “Clearly, many investors aren’t as informed as they might think regarding fixed income, so advisors can play a critical role in educating clients on the impact of market conditions on fixed income performance as well as the role of fixed income in their clients’ portfolios.”

Most admit they lack knowledge; “advised” more likely to seek help

At the same time, many investors are aware of their knowledge deficit when it comes to the fundamentals of fixed income investment. Sixty percent don‘t consider themselves knowledgeable regarding fixed income, and just 43% said they understand the market and economic forces that drive bond prices.

The survey suggests that an advice relationship does encourage investors to get the help they need.

More than half – 56% -- of those surveyed indicated that they don’t plan to seek guidance on what to do about investing in fixed income over the next year (even though most – 65% – said that, over the next year, interest rates will most likely rise). However, advised investors are considerably more likely than those unadvised (55% vs. 31%) to say they will seek guidance.

Advice also seems to make a difference when it comes to overall confidence levels: Advised Americans are much more likely than unadvised Americans to say that the investments they own today are the right ones for them (88% vs. 70%).

A Strong “Home Bias” in Fixed Income Investment

The BlackRock survey suggests that Americans’ lack of knowledge regarding fixed income encompasses more than just the implications of rising rates. Although investors generally need to consider investing beyond their borders as well as at home in order to achieve proper diversification, those surveyed seem hesitant: 69% (and 78% of those “knowledgeable”) say they would be more comfortable investing in bonds from the U.S. than from foreign countries.

“Over the years, we’ve seen a strong investor bias toward investing in their home country across all asset classes, including fixed income, but what’s worked in the past may not work going forward,” said Mr. Rosenberg. “As the marketplace changes, fixed income investors need to stay flexible and carefully consider the entire range of appropriate investing options, which includes looking for opportunities beyond their borders.”

Investing involves risks, including possible loss of principal.

About BlackRock
BlackRock is a global leader in investment management, risk management and advisory services for institutional and retail clients.  At March 31, 2017, BlackRock’s AUM was $5.4 trillion. BlackRock helps clients around the world meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles.  BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®.  As of March 31, 2017, the firm had approximately 13,000 employees in more than 30 countries and a major presence in global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at | Twitter: @blackrock_news | Blog: | LinkedIn:

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