Investors who want to balance their stocks and shares bets with some fixed income investments, such as bonds, will need to take more risk to find inflation-beating returns.
The bond market might be out of fashion at the moment with government bonds offering negative real returns. But there are a whole host offering different levels of return — and risk.
One big risk with fixed income investments is inflation — the arch enemy for bond investors. UK inflation jumped to 2.1 per cent in May, over the Bank of England’s 2 per cent target for the first time in two years. The pace of inflation across the Atlantic has soared to a 13-year high of 5 per cent.
As well as rising prices eating into