Can these ‘old school’ investments protect you from falling markets?

Importantly, fixed income isn’t just a hedge against sharemarket volatility. It’s an asset class that aims to provide predictable cashflow for those seeking it. This can make it a suitable long-term holding for anyone from retirees to self-managed super funds, business owners or just someone looking to “park” their cash before redeploying it.

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Investments like bonds are often misunderstood or considered “old-school”. People sometimes think, for example, they’re just for the wealthy or big superannuation funds. But a broad range of managed investments now overcome traditional barriers to entry, with technology also allowing easy account establishment and flexible access to capital.

Of course, no investment is risk-free. Rising interest rates, inflation and the potential for issuers to default on payments to investors are among the biggest risks in fixed income.

But a rule of thumb that bonds, for example, rise when shares fall has proved mostly true, with only rare occasions when both fell in the same year. One example was in 2022 – when a sharp, unexpected rise in interest rates and other factors hit bonds at the same time as shares slumped in value.

It was the first time since 1977 that both shares and bonds fell in the same 12-month period. Since then, their relative performance has reverted to historical norms and there is a case to argue that bonds may be one of the best risk-adjusted investments of 2025.

Opting for an experienced fund manager with an established track record can be a good way for investors to mitigate the risks above. Things to consider when choosing a fund include whether its portfolio is spread across a broad range of securities to ensure appropriate diversification.

Its targeted return and how it aims to achieve that goal are also important questions to ask. Finally, don’t forget to look closely at its fee structure and whether it’s easy to withdraw your funds.

History shows that fixed income has a real place in a well-diversified portfolio for all kinds of investors. It is now widely available to the average Australian, with a broad range of firms opening up the asset class to people who previously struggled to tap into its benefits.

Gaby Rosenberg is co-founder of investing app Blossom.