When considering whether to buy bonds when interest rates are high, investors should consider their investment objectives
Bonds are often used as a way to generate income or to diversify a portfolio
If an investor is seeking income, buying bonds with higher yields may make sense, even when interest rates are high
However, if an investor is looking to diversify their portfolio, other factors may come into play, such as the credit quality of the bond issuer and the duration of the bond
Investors should also consider the duration of the bond when deciding whether to buy bonds when interest rates are high
As we discussed in our previous article, bonds with longer durations are more sensitive to changes in interest rates than those with shorter durations
This means that if interest rates rise, the price of a longer-term bond will fall more than the price of a shorter-term bond
As a result, investors who are concerned about interest rate risk may prefer to invest in shorter-term bonds or bond funds