What to Know About Robo Advisors for Bonds

When the stock market blasts upwards, but with recent volatility and stock market losses, bond investing interest is starting to rise.The 10-year return for S&P 500 investments that include dividends is 8.42 percent, that's more than double the return on the 10-year Treasury bond at a measly 3.86 percent, according to an analysis by Aswath Damodaran, a professor of finance at the Stern School of Business at New York University. With that, it's easy to discount the importance of bond investing. But investing experts say diversity of investments is important and using a robo advisor for bond investing can be part of that strategy.Robo advisors, or digital investment managers, are grounded in smart investing theory and offer bond investing to their clients. Investing with robo advisors curtails investors’ worst impulses of excessive trading and overweighting stocks. The lack of human bias and a systematic investment approach wisely allocates bonds along with stocks to robo advisory investment portfolios. But frequently, an equity focus trumps that of fixed investing. “Because stocks and bonds react differently to adverse market conditions, including both in your portfolio is a great way to reduce your portfolio's sensitivity to market volatility,” says Brian Barnes, founder and CEO of Chicago-based M1 Finance. Bond exchange-traded funds are traded on major exchanges. These investments are an easy way to diversify and create an income stream, he says.