Often investors could only buy the bonds directly from the companies issuing them. Interest rate investments provide investors with a steady and reliable income stream, whereas returns from share investments fluctuate in line with the profitability of the company. A key factor in investing is diversification among the different asset classes to ensure that the effects of shifts in market conditions have minimum impact on the long-term performance of a portfolio. For example, a rising share market produces positive returns, which encourages an increasing number of investors to put all their money into equities. This may leave them vulnerable if the buoyant market cycle ends and equities lose value.
Most investment advisers recommend an asset allocation or a suggested percentage for each class.
Rather, investors know that a mix of shares from different sectors should be held, representing holdings in mining, bank, insurance and industrial stocks. Furthermore, to soften the potential impact of market or interest rate changes on overall return, a portfolio should also include a spread of maturities. Portfolio management Interest rate investments can be used for a number of different and concurrent reasons, including to stabilise a portfolio, to reduce its overall risk or to provide a temporary haven for profits. In the short term, they can also be useful in helping preserve the value of an investor's capital while you wait for new investment opportunities. A primary, or new issue, market for interest rate securities is created when a company first offers them for sale to the public.