As part of the asset allocation decision, Beacon employs fixed-income securities to diminish overall portfolio volatility and augment current income. In balanced portfolios, fixed-income securities generally represent between 35 percent and 50 percent of total assets.

Investment Grade Bonds

                   Under present commercial bank regulations issued by the Comptroller of the Currency, bonds in the top four credit rankings, commonly known as investment-grade bonds, are generally recognized as eligible investments for fiduciaries. Investment-grade securities can include U.S. Treasury bonds, U.S. Government Agency bonds, and bonds issued by corporations.

                    Historically, corporate securities have outperformed government securities in nearly four out of five years. Our focus is on corporate bonds that have an intermediate-term maturity and are non-callable. We have found intermediate-term bonds, with an average maturity of five to ten years, to offer the most compelling risk/return relationship for our clients’ portfolios. We buy non-callable bonds to avoid the issuer redeeming the bond prior to its maturity date. This ensures that control stays with our clients and not the issuing company.

                   We select investment-grade bonds from an array of industries to optimize opportunity while diversifying portfolio risk. In addition, we select quality, liquid issues. That increases our ability to sell bonds easily and quickly if we need to alter the portfolio mix.

High-Yield Bonds

                    As an adjunct to wealth management and where appropriate, Beacon includes high-yield bonds in client portfolios. In contrast to investment-grade bonds, which trade almost mathematically in lock step with prevailing interest rates, high-yield securities are more affected by the financial condition of the company.

                    Considered a separate asset class complimenting equities and investment grade bonds, high-yield securities can offer increased diversification for wealth management clients. We focus on high-yield bonds with ratings that border the investment grade universe. Studies have shown that these top tier high-yield bonds offer similar risk characteristics to their neighboring investment-grade bonds, while providing significantly higher yields.

                   Within the universe of high-yield bonds, Beacon searches out companies with stable or improving cash-flow, because we believe their bonds have the opportunity to improve their credit rating to investment grade, which can generate additional price appreciation.