Income investors may be taking more risk to meet their cash flow needs as they stretch for yield in a low-rate environment. While fixed income assets are usually intended to be the lower-risk component of a portfolio, they do have certain risks — interest rate, credit and liquidity risk — that could catch investors off guard. And as bond price sensitivity to interest rates (duration risk) has increased, the incremental yield available to investors who take on this added risk has decreased. A balanced focus on total return within a fixed income portfolio could offer the potential for income, lower volatility and, where appropriate, some capital appreciation.

More fixed income insights from MFS experts at