Traditional investment thinking says that bonds should be a growing part of a portfolio as we age in order to counter the volatility and risk of equities.
Here is another point of view to consider. But be warned, there are some important considerations when implementing this strategy.
I DON’T WANT bonds in my portfolio—or, at least, not to the degree traditionally recommended in financial planning guidelines. For years, I had accepted the premise that bonds should be included in a serious investor’s portfolio. Not that I necessarily followed that dictum. But I accepted the idea that young people should have a low percentage in bonds, and increasingly greater percentages through middle age and retirement.
I kept thinking that someday I’d come around to more bonds, but not now. The years went by. I took early retirement at age 62 and had zero dollars in bonds. Still relatively young, I felt. I’ll definitely think about those bonds down the road. Four years later, after my divorce was finalized, I purchased a blended stock-bond fund. That raised my bond allocation from zero to 1.7%.
Ten years later, my bond allocation reached a lifetime high of 8.7%. About that time, I noted that my blended fund, with both higher fees and lower annual returns, was a drag on my portfolio. I moved two-thirds of the fund into more productive pure stock funds.
Source: Cutting the Bonds – HumbleDollar