We see two roles for “Debt” in any portfolio
- Yield – if the regular income is required to fund expenses.
- Optionality – if a debt instrument is liquid, it not only provides you a coupon, but also serves as a free Call Option to deploy additional capital in Equity markets/other Asset Classes if a very attractive opportunity came by. Most investors rue having no Cash to deploy during a crisis when Equities are available at very attractive valuations. Having access to Cash (ability to sell the Bond) + courage (ability to redeploy into Equities) are invaluable during a crisis.