Individual protfolio managment, rising rates, and bonds individual, question, investor, allocation, management

trogulj

I have a question about real world asset management that relates to the curriculum.

Take an individual investor, lets assume their risk tolerance dictates low risk. i.e. 64 years old and 750,000 in retirement funds (ignore return requirements, but assume the 750k is not a lot of money...they don't live in Kenya..., its not relevant to this question).


Lets assume again a high allocation to bonds is prudent.


How does one reconcile the fact that in an environment like this one (low low interest rates) that as the economy gets better, yields are bound to increase, thus dropping the value of the bonds....

I realize more bond exposure lowers income risk, but what about the horrible price risk in the portfolio.

How would a private wealth manager deal with putting a customer in piles of bonds when rates have only one direction to go, long term?