If you have a 100% Bond portfolio at inbestMe, you may have noticed in recent weeks a behavior that caught your attention: a decline in the accumulated return of your bond portfolio after a positive start to the year.
We want to explain what is happening, why it is a normal part of the functioning of this type of portfolio, and what options you have if this situation causes some discomfort.
Bonds and interest rates: a relationship worth understanding
There is a fundamental rule in the world of fixed income that sometimes surprises investors: when interest rates rise, bond prices fall. And vice versa.
Why? Because the value of a bond depends on the future cash flows it will generate. If rates rise, bonds already on the market (with lower coupons) become less attractive compared to new issues. For someone to want to buy them, their price must adjust downward.
This effect is temporary from the perspective of an investor holding bonds to maturity: as long as they continue receiving the coupons and recover the principal at maturity, the market price drop is an accounting reflection, not a permanent loss.
We have written about this topic on other occasions. If you want to dive deeper, we recommend reading:
- Inverse relationship between the price of a bond and market interest rates
- Bond dynamics: relationships between interest, price, and maturity.
What is happening now?
During the first weeks of March 2026, markets began to anticipate a possible change in the macroeconomic scenario. Geopolitical tensions, energy price developments, and certain inflationary pressures led some investors to anticipate that interest rates might not fall as quickly as expected, or that moderate hikes could occur in certain segments of the yield curve.
This has resulted in a correction in bond prices, affecting our portfolios. The Prudent Bond Portfolio, with a shorter duration, experienced a smaller decline around 0.4%.
The Bold Bond Portfolio, with longer duration and therefore greater sensitivity to rate movements, recorded a more pronounced correction of up to 1.8%.
It is important to emphasize that we are not facing permanent losses, but a market price valuation during a period of uncertainty. The performance of these portfolios year-to-date remains positive or close to zero.
As shown in the following chart, by the end of February 2026, the Prudent Bond Portfolio had accumulated 11.7% (annualized 3.4%) and the Bold Bond Portfolio 22.1% (annualized 4.6%).
In fact, all our “prudent” portfolios met their objectives through 2025.
Three possible scenarios from here
We are not fortune-tellers, nor do we intend to be.
But we can help you understand what could happen in different contexts:
- Scenario 1 – Rates rise more than expected: Pressure on bond prices could continue in the short term. However, at the same time, new bonds added to the portfolio would do so at more attractive rates, improving expected future returns.
- Scenario 2 – Rates stabilize: Portfolios would tend to stabilize and continue generating returns via coupons, which is the most predictable component of fixed income.
- Scenario 3 – Rates fall: Portfolios would benefit from both coupon payments and bond price appreciation, quickly recovering lost ground.
In all cases, time works in favor of the patient investor. Well-managed and diversified fixed income tends to offset price fluctuations over the time horizon for which it was designed.
The importance of the time horizon and alignment with your profile
Bond portfolios are designed for investors with a conservative or moderate-conservative profile and an investment horizon of at least 2-3 years. If this still applies to you, it is best not to make hasty decisions based on short-term fluctuations.
However, if your personal situation has changed —you need the money earlier than expected, your tolerance for volatility is lower than you thought, or you simply want to review your strategy— it makes sense to analyze it together.
What options do you have?
Don’t want to assume volatility? The Savings Portfolio is still an option
If your goal is to preserve capital without exposure to price fluctuations, our Savings Portfolio may be the most suitable alternative. It offers a stable return (current variable IRR 1.6%), linked to money market rates, which in turn are tied to central bank policy rates, and has almost zero risk, as its volatility is close to 0% and rarely shows significant declines.
The only risk is that one day interest rates approach 0% or become negative. In this case, we will contact you to find an alternative.
In general, the inbestMe Savings Portfolio tends to be more efficient than a bank deposit for several reasons:
- Usually offers a rate close to official rates, without relying on temporary offers or commercial conditions.
- More tax-efficient, as returns accumulate without taxation until redemption.
- Allows transferring balances to other fund portfolios, or receiving transfers from them, without immediate tax impact.
That said, although it can be a good alternative for an emergency fund or short-term savings, the Savings Portfolio will almost always provide returns below inflation. Therefore, in most cases, it will not be sufficient on its own to achieve medium- and long-term objectives or complement retirement savings.
Want to align your investment with a specific goal?
In 2023, we launched Target Portfolios with different maturities.
Target Portfolios are also bond portfolios but with a maturity date and a target return. They usually offer a higher IRR than the Savings Portfolio and generally lower volatility than a traditional bond portfolio. Additionally, the shorter the time to maturity, the lower the volatility tends to be.
They also offer the advantage that, at maturity, you can reasonably expect that target return. In other words: if you subscribe and hold until maturity, you “lock in” a target return and should not worry excessively about interim fluctuations.
You always have the option to switch to other inbestMe portfolios if your final goal shifts over time or if your profile allows for slightly higher volatility.
