More From Dr. Brian Jacobsen, CFA, CFP®
Fixed-Income Factors in Target Date Strategies
Fixed-income factors are not as widely discussed as equity factors, but they are equally important in designing a target date portfolio in an attempt to improve participant outcomes.
Putting the Factors Together
Each factor of a fixed-income portfolio—so interest-rate sensitivity, credit exposure, and inflation sensitivity—may play an important role in constructing a dynamic fixed-income portfolio for target date investing.
Factor: Credit Exposure
Another common factor in fixed-income investing is credit exposure because investing in securities with an element of credit risk has historically generated positive risk premiums over time.