Spotlight Role of Bonds Low Yields, Low Expectations 33 Bonds Still Have a Role 36 As Diversifiers, Do Bonds Still Work? Correlations changed in 2020, but bonds (mostly) did their job. DIVERSIFICATION Christine Benz and Amy C. Arnott With yields of core bond funds near their historic lows and expected real returns barely in the black, investors can be forgiven if they're questioning the role of bonds in their portfolios. If bonds can't provide necessary income and returns above inflation, what are they good for? Traditionally, bonds also have been reliable diversifiers in portfolios with equities. They add ballast and help take the edge off in periods when equities are volatile. But even these benefits have been put to the test recently. In the early days of the COVID-19-driven market crash, most high-quality bond funds performed exactly as one would have hoped: On down days for stocks, they gained a bit of value or at least held steady. morningstar.com/lp/magazine 27http://www.morningstar.com/lp/magazine